27 March 2023
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Evidence of economic resilience in UK retail sales

By Daniel Richards

UK data at the end of last week showed resilience in the UK economy. Retail sales grew by a larger than expected 1.2% m/m in February and excluding auto and fuel was still up 1.5% m/m. Flash PMI readings for both manufacturing and services came in slightly lower than forecast in March, but growth in the services sector continues to offset weakness in manufacturing, and the composite PMI was in expansionary territory at 52.2.

Eurozone flash PMIs were also largely better than expected for March, again with strong services sectors more than compensating for declines in manufacturing. The composite PMI for the Eurozone rose to 54.1 from 52.0 in February.

Data in the US was more mixed at the end of last week. Durable goods orders declined -1.0% m/m against a forecast for a 0.2% increase. While this was partly due to lower aircraft orders, there does appear to have been a slowdown in business investment even before the banking sector stress in mid-March. Tighter credit conditions may see investment slow further in the coming months, weighing on overall economic growth. Preliminary PMI data shows a slight improvement in manufacturing, although it remains in contraction territory, while services sector activity and business conditions improved in March. The composite PMI for the US rose to 53.3 in March from 50.1 last month.  

The focus this week will likely remain on the stress in the banking sectors in Europe and the US. Preliminary March inflation data for the Eurozone will also be closely watched, as will personal income and spending data due later this week in the US.

Today’s Economic Data and Events

  • 12:00 GE IFO Business Climate (Mar) forecast 91.0

Fixed Income

  • US treasury yields fell further on Friday, with concerns about the health of the global banking system lingering. The US 10yr yield fell by 5bps on the day to reach 3.376%, while the 2yr yield fell by 6bps to end the day at 3.767%.
  • UK 2yr and 10yr gilt yields both fell by 8bps on Friday to reach 3.17% and 3.274%, respectively.   
  • Moody’s upgraded the outlook for six Saudi firms from stable to positive, citing the strength of the Saudi economy. The firms are the Public Investment Fund, Aramco, SABIC, Saudi Telcom Co, Saudi Electricity Co and Saudi Power Procurement Co.


  • Expectations that the Fed was nearly done with hiking rates saw the dollar lose ground through Monday-Wednesday, and though it staged a comeback through the back end of the week as risk-off sentiment returned, this was not sufficient to see the greenback close up w/w. The DXY index ended the week down 0.6% compared to the previous Friday.
  • Other haven currencies also saw gains through the close of the week, with the yen climbing to levels last seen six weeks ago as it gained 0.9% over the week to JPY 1.30.73/USD while CHF added 0.7% w/w.
  • Despite losing ground against the dollar on Friday, both the Euro and Sterling closed higher over the week. The Euro climbed 0.8% w/w to EUR 1.0760/USD while cable closed at GBP 1.2233/USD on Friday, a w/w gain of 0.5%.


  • East Asian equity markets saw losses on Friday but their w/w gains remained intact as markets in Asia, and China in particular, looked comparatively insulated from the banking sector concerns weighing on markets in Europe and the US. The Hang Seng ended the week 2.0% higher, while the mainland Shanghai Composite climbed 0.5% w/w. In Japan, the Nikkei added 1.4% even as the yen advanced.
  • In Europe there were heavy losses on Friday as banking sector concerns rose once more, with banks the biggest losers. The major equity indices were all down by around 1.25%-1.75% on Friday managed to hold on to their w/w gains with the FTSE 100 adding 1.0% w/w and the CAC and the DAX both gaining 1.3%.
  • In the US, all three major indices ended the week higher, with the Dow Jones, the S&P 500, and the NASDAQ gaining 1.2%, 1.4%, and 1.7% respectively.


  • Oil prices made further small losses on Friday. Brent was down 1.21% to end the day at USD 74.99/b, while WTI fell 1% to reach USD 69.26/b. Despite the declines on both Thursday and Friday of last week, prices were still higher relative to where they had started the week. 

Written By

Daniel Richards Senior Economist

Jeanne Walters Senior Economist

Khatija Haque Head of Research & Chief Economist

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Daniel Richards

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