Think Ahead - Global Markets Navigate Inflation and Economic Fallout

As we look ahead to the coming week, global markets continue to navigate through various headwinds, including rising inflation concerns and the economic fallout from the demise of the 16^th biggest bank in America, Silicon Valley Bank.

Starting in the United States, the forecasted consumer inflation numbers expected on Tuesday are estimated to show a slowdown. The upcoming data, along with the producer inflation numbers expected on Wednesday, will influence whether there will be further rate hikes in the coming months. There is debate over whether the Federal Reserve was correct to slow down its rate hiking cycle in February, given recent strong economic data in the US, including surging retail sales and payroll growth. Inflation measures have also increased, contrary to previous predictions.

Also, in the United States this week, retail sales for February will be released. In January, US consumer spending rebounded with a 3% gain, surpassing expectations, after two successive monthly declines. This indicates that the rebound was broad-based, as even the control group measure used to calculate GDP contribution rose by 1.7%. The question is whether this trend was maintained in February, which could have significant ramifications for Fed policy and its trajectory of further rate hikes.

In the United Kingdom, unemployment and wage growth data for January is expected on Wednesday. Despite wages lagging behind inflation, the UK labour market has been a bright spot in the economy. Recent wage data showed a significant increase in wage growth, rising from 6.5% to 6.7% in the three months to December. Additionally, payrolled employees rose by 102k in January, indicating a tight labour market with double-digit headline inflation. Unemployment remained steady at 3.7%, but January's payrolled employee gains may result in a drop to 3.6% this week.

In China, industrial production and retail sales for the January to February period are expected on Wednesday. The Chinese retail sales numbers are expected to show a rebound of 3.5% after two months of declines, due to lockdown restrictions being eased and the Chinese New Year leading to revenge spending. This could also lead to a significant upside surprise and signal an improvement in domestic demand, as seen in recent China trade numbers. Industrial production is also expected to rebound to 2.6%.

In South Africa, Stats SA will release mining production figures and manufacturing output data for January on Tuesday, with both expected to show a slowdown due to load-shedding and global economic uncertainty. On Wednesday, retail sales figures for January will be released, shedding light on consumer spending habits. Additionally, consumer confidence for the first quarter will be released on Friday.

This week will be filled with South African corporate earnings reports as several companies are expected to release their annual or interim results. The results for MTN and Absa are due on Monday, followed by Old Mutual's results on Tuesday, and Exxaro's results on Thursday.

Overall, global markets will continue to face a range of challenges in the coming week, as investors monitor economic data releases and the economic fallout from Silicon Valley Bank.

Economic Data Highlights:

Monday 13^th of March

• India – Inflation rate (FEB)
• Turkey – Retail sales (JAN)

 
Tuesday 14^th of March

• UK – Unemployment Rate (JAN)
• SA – Manufacturing production (JAN)
• SA – Mining production (JAN)
• US – Consumer inflation (FEB)

Wednesday 15^th of March

• China – Industrial production (JAN-FEB)
• China – Retail sales (JAN-FEB)
• SA – Retail sales (JAN)
• US – Retail sales (FEB)
• US – Producer inflation (FEB)

Thursday 16^th of March

• Japan – Balance of Trade (FEB)

 
Friday 17^th of March

• SA – Consumer confidence (Q1)