Britain’s current account deficit was revised down sharply on Thursday by the country’s statistics office in a set of data which also confirmed the economy slowed slightly in late 2017.
The current account deficit stood at 18.4 billion pounds in the fourth quarter, much lower than a median forecast of a shortfall of 24 billion pounds in the Reuters poll of economists and below all forecasts in the poll.
The Office for National Statistics also confirmed gross domestic product grew 0.4 percent on the quarter – slowing from growth of 0.5 percent in the third quarter – and was up 1.4 percent compared with the last three months of 2016.
The ONS said it had revised up its estimate of British economic growth in 2017 as a whole to 1.8 percent from a previous reading of 1.7 percent, although the annual growth rate remained the lowest since 2012.
The USD has staged an impressive two-day rally. All eyes will be on the February ‘core’ PCE deflator – the Fed’s preferred measure of inflation – and personal spending and income data. We are in line with consensus looking for inflation to pick-up a little to 1.6% (from 1.5%), but slightly more positive on personal income and spending.
UK sentiment readings early this morning continue to show a resilient economy. The GfK consumer confidence index improved to -7. Further information on Q1 GDP trends will be provided by the index of services for January. ‘Hard’ data releases for Q1 have so far been mixed. January industrial production rose 1.3%m/m, while construction output fell sharply by 3.4%m/m.
The index of services report will complete the picture for January and is expected to show a rise of 0.2%m/m. That would keep the UK economy on track to record growth of at least 0.3% in Q1. At the same time, the ONS release the 3rd estimate of Q4 UK GDP.
In Europe, the focus is on German CPI, ahead of Eurozone readings next week. We forecast headline CPI to have risen to 1.6% from 1.2%y/y.