inflation rate that comes in a hard circumstances as global economies
struggle to recover. The concerns come after the slowdown in growth
witnessed at the end of 2010 and amid the intended sharp spending cuts
by governments to reduce budget shortage.
Recent inflation data in Europe showed remarkable price acceleration
that pushed inflation up to 3.7% in the UK and 2.4% in the euro zone,
to exceed the embattled level by both BoE and ECB of 2%.
Last week, worries increased in UK as PPI output rose to 4.8% in the
year ending January from the revised 4.1% and PPI input climbed to
13.4, exceeding the revised reading of 12.9%, ahead of the release of
CPI for January which is estimated to skyrocket to 4.1%!!
The elevating inflation levels are giving a direct threat to consumer
spending which in turn will affect growth that is already pressured by
the simplicity measures announced to lower budget squeeze.
In fact, a further surge in UK inflation in January is not surprise as
upheavals in Egypt pushed spot Brent oil to $100 a barrel for the
first time in two years, while the VAT was raised to 20% in January
from 17.5% last year.
But, UK retail sales are expected to improve in January after the
tremendous drop witnessed in December in the wake of the harsh whether
that hit Europe causing a decline in sales as households stayed at
home.
Retail sales without auto fuel are predicted to rise 0.3% from the
prior 0.1% drop and the reading with auto fuel is estimated to advance
0.6% from the preceding 0.8% fall.
The British economy contracted 0.5% in the fourth quarter, where CBI
lowered growth forecasts for the country for 2011 and 2012. Though,
the BoE did not respond to either the sluggish growth or high
inflation as policy makers voted to leave both interest rate and APF
quantity unchanged in February, doubtless till they get the updated
growth and inflation forecasts due this week in February's inflation
report.
In the euro area, the main concern of the ECB turned to inflation
after the rise signaled over the past few months. Trichet mentioned
that while prices are expected to accelerate on the small-term due to
the soar in commodity prices, they are vacant to stabilize over the
standard term.
With regard growth in the region, GDP advanced reading for the euro
area will show 0.4% expansion following the 0.3% growth in the third
quarter, according to median estimates, while Germany, which led
recovery last year, will grow 0.5% from 0.7% in the three months
ending September.
Source: Fxstreet.com
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