The recent collapse in oil prices saw the US CPI fall to -0.7% (MoM). Nonetheless, we expect a pick-up in Q2 2015 as a result of an increase in consumer disposable income. Furthermore, whilst the majority of central banks are adopting QE measures, the Fed wants to implement a more restrictive form of monetary policy. Recent data, CPI included, suggest that the Fed will delay a US interest rate rise until Q2/Q3 2015.
Recently, US growth for Q4 2014 was revised down to 2.2% while GDP for the US is likely to decline even more due to the unfortunate extreme weather conditions of late which could cost the US economy over $1bn. We note, however, that lower oil prices are likely to assist growth since 66% of US GDP is provided by consumer spending.
University of Michigan (UoM) consumer sentiment has been rising over the past couple of years, suggesting that consumers are confident in the economic recover. Indeed, low oil prices and the tightening labour market have seen these sentiment readings boosted to pre-crisis highs
In terms of UK economic data, following a quiet few days we have PMI, consumer credit and a BoE decision on interest rates all coming out this week. Low oil prices are again expected to help boost consumer spending and hence profits for firms in the UK, while we note declining unemployment should help to produce more output and thus further growth.
Nonetheless, the tenuous situation in the Eurozone could prove problematic to the UK, with negative effects on the UK’s trade deficit (the E/Zone being the key trading partner) a distinct possibility and firms’ profits are also likely to be capped due to weak demand.
Recently, US growth for Q4 2014 was revised down to 2.2% while GDP for the US is likely to decline even more due to the unfortunate extreme weather conditions of late which could cost the US economy over $1bn. We note, however, that lower oil prices are likely to assist growth since 66% of US GDP is provided by consumer spending.
University of Michigan (UoM) consumer sentiment has been rising over the past couple of years, suggesting that consumers are confident in the economic recover. Indeed, low oil prices and the tightening labour market have seen these sentiment readings boosted to pre-crisis highs
In terms of UK economic data, following a quiet few days we have PMI, consumer credit and a BoE decision on interest rates all coming out this week. Low oil prices are again expected to help boost consumer spending and hence profits for firms in the UK, while we note declining unemployment should help to produce more output and thus further growth.
Nonetheless, the tenuous situation in the Eurozone could prove problematic to the UK, with negative effects on the UK’s trade deficit (the E/Zone being the key trading partner) a distinct possibility and firms’ profits are also likely to be capped due to weak demand.
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