27th February 2018


UK jobless figure rises, but productivity up

It was a mixed week for UK economic data for the fourth quarter of 2017. News that the UK unemployment rate has risen for the first time in two years to 4.4% may have led to worrying headlines, though it is worth remembering that the figure was up only slightly from a 42-year low of 4.3%. The Office for National Statistics (ONS) also noted that the number of people in work continued to rise, increasing by 88,000, and that there was a 109,000 fall in the number of people classed as economically inactive, which helped lift the jobless rate. For the same quarter, UK GDP growth was unexpectedly revised down to 0.4%, from the preliminary estimate of 0.5%, which raised some doubts that the Bank of England will raise interest rates in May. However, better news came from the ONS’ productivity data, which showed that output rose 0.8% during the quarter.

US Fed minutes suggest more rate hikes…

In the US, as in the UK, investors are focusing intently on the timing of possible interest rate rises. Last week, the Federal Reserve released minutes from the January meeting of its Federal Open Market Committee (FOMC) giving us a closer idea of the thinking behind its decision to hold rates three weeks ago. It suggests that officials see increased economic growth and an uptick in inflation as justification to raise interest rates gradually, adding further weight to expectations that hikes will happen sooner rather than later.

… as US jobless claims drop to 45-year low

Whereas the UK jobless total may be rising, initial claims for state unemployment benefits in the US dropped 7,000 to a seasonally adjusted 222,000 for the week ended February 17, the Labor Department said. Claims fell to 216,000 in mid-January, which was the lowest level since January 1973.

Chinese house prices fall in big cities

Investors have long feared an overheating Chinese property market, and prices again climbed in January according to the latest data. However, prices in the country’s biggest ‘tier-one’ cities have fallen year-on-year. New home prices – excluding government-subsidised housing – climbed in 52 of 70 cities tracked, compared with 57 in December. But they fell in 13 cities from the previous month and were unchanged in five. Beijing and Shenzhen reported higher home prices compared with December but they fell from a year ago. Prices in Shanghai dropped in January from December and from a year earlier, the National Bureau of Statistics of China said.

Japanese inflation still below target

Japan’s consumer price inflation (CPI) stood still at 0.9% in January. This is the third month in a row that the rate has stood still, and the expectation is that it will remain flat in the coming months given that energy costs have peaked. Bank of Japan governor Haruhiko Kuroda reportedly said he had no plans to take a fresh look into why the figure remains way below the bank’s 2% target.

Looking ahead - TALKING POINTS

Will Italian election herald Berlusconi return?

Italians go to the polls on Sunday, with opinion polls pointing to a hung parliament. Coalition alliances could prove to be vital and may involve the Five Star Movement (M5S), which is seen to be the frontrunning party. Former prime minister and head of Forza Italia Silvio Berlusconi will be a key player. Italy is the eurozone’s third-largest economy.  Many fear a eurosceptic coalition between M5S and the far-right Lega Nord, though analysts believe this outcome is unlikely. As we have seen in Germany in recent months, failure between the main parties to form a collation could be the biggest problem for markets, which dislike uncertainty.

Italian GDP growth - January 2015 to January 2018

 Italy GDP Feb 18

Source: National Institute of Statistics,

A post-holiday boost for Chinese economic growth?

The official purchasing managers index (PMI) for manufacturing in China is released on Wednesday, it is based on surveys on new orders, inventory levels, production, supplier deliveries and the employment environment. The data is expected to indicate further solid growth in February, despite holidays around the Lunar New Year. An update from the Chinese government last week showed that retail and catering businesses were winners during the seven-day public holiday, racking up a combined 926bn yuan (£105bn) in sales, a 10% rise over last year. Many also took the opportunity to travel to meet family members with the number of domestic trips increasing by 12% to 386m, and tourism revenue jumped to 475bn yuan, according to the China National Tourism Administration.

Chinese manufacturing PMI – February 2017 to January 2018

 Rsz _china _pmi _feb _18

Source: National Bureau of Statistics,


Through a well-diversified approach to asset allocation, the Omnis investment team aims to defend and grow the value of your portfolio through market cycles. After the far from straight forward elections in France and Germany, now the focus turns to Italy, another eurozone heavyweight, but also an economy which has had its fair share of problems in recent years given its indebtedness. Any electoral shock may well hit investment markets temporarily, but from a wider perspective economic growth in the eurozone continues to impress and so any blips could present a good buying opportunity.

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