Leading Indicators | The end of the hiking cycle? | US growth slows | EU consumption falls
Discover key economic and financial metrics, and what to look out for in the week ahead.
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Here we look at the leading indicators commodities, trade, equities and more. in the world of economics. Download the dashboard for in-depth analysis into commodities, trade, equities and more.
Is the hiking cycle nearly over?
This week, the US Federal Reserve (Fed) and European Central Bank (ECB) will make interest rate decisions, whilst the Bank of England (BoE) will do so next week. Economists anticipate a 25bps hike from the BoE, lifting the rate to 4.50%. Although some forecasters believe that the tightening cycle is now largely over, money markets are now pricing in rates rising to 5%. For both the Fed and ECB, money markets are also pricing in a 25bps increase. As always, there are multiple forces at play: further turmoil in the banking sector raises the possibility of the Fed pausing the tightening cycle; conversely, the marginal rise in the Euro Area’s headline inflation to 7% in April suggests that the ECB remains further away from the end of its hiking cycle, with markets pricing in an additional three rate hikes later this year.
US growth slows in Q1 2023.
US economic growth slowed in the first quarter of 2023, with GDP rising by an annualised +1.1%, marking a slowdown from a +2.6% expansion in the previous quarter, and missing market expectations of +2.0% growth. This was the weakest pace of expansion since Q2 2022, suggesting the weight of the Fed’s historic monetary tightening run is beginning to take effect. Although the slowdown was marked by business investment growth stalling and a decline in inventories, inflation-adjusted consumer spending rose at an annual rate of 3.7%, up from the 1.0% recorded last quarter. Meanwhile, the third failure of an American regional bank continues to highlight the tightening of the current lending environment. This may further add to the headwinds on already slowing GDP growth.
EU gas consumption fell.
EU gas storage ended the heating season at the highest level in years at around 55% capacity. Recently released Eurostat data show that EU consumption of natural gas dropped by 17.7% in the period August 2022-March 2023, compared with the average gas consumption for the same months between 2017 and 2022. The majority of EU countries reached the -15% target, suggesting that the risk of gas rationing this winter remains low. Meanwhile, the EU burnt less coal than in previous years, while renewable energy supplies increased. Combined wind, solar and hydroelectric output outstripped fossil fuel generation for the first time, providing 40% of all electricity supplies, according to the FT.
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