16 February 2023
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US retail sale rise sharply in January

By Jeanne Walters

The value of US retail sales rose by the most in nearly 2 years in January, recording a 3% m/m rise. This was higher than consensus expectations for a 2% m/m increase and significantly higher than the -1.1% m/m fall seen in December. There were rises across all 13 goods categories on the month, with the biggest increases seen in motor vehicles, furniture and restaurants. Stripping out motor vehicles and fuel sales, the value of sales still rose 2.6% in January. The January print, combined with last week’s bumper NFP data and yesterday’s CPI release, will likely add further fuel to the Fed’s recent “higher for longer” message.

US industrial production remained flat on the month in January, up from -1.0% m/m in December. Underlying the January print was a 9.9% fall in utilities output, driven by unseasonably warm weather in the Northeast of the country. The warmer weather also likely influenced the 2% rise in mining output, albeit in the other direction, with crude production rising. There was also a robust 1% m/m rise in manufacturing output in January. Although January manufacturing output data was positive, there was continued evidence of a contraction in manufacturing activity in New York state in the February Empire survey. It remained in contractionary territory for the 3rd consecutive month in February, but the pace of decline did slow significantly, with the February reading increasing to -5 from -32.9 in January. The 6-month ahead outlook sub-component improved on the month, rising to its highest level since May 2022.

UK inflation fell sharply in January, with the headline CPI figure coming in at 10.1% y/y from 10.5% y/y in December. This was lower than consensus expectations but consistent with the Bank of England’s own forecast. There was also a material drop in core CPI, which fell to 5.8% y/y in January from 6.3% in December. On a m/m basis the fall in headline CPI in January amounted to a -0.6% drop. The fall was driven by declines in the transport (on the back of falling fuel and airfare costs) and restaurant and hotels sub-components. The BoE will no doubt be encouraged to see the decline in services inflation, which tends to be more closely linked to domestic conditions, from 6.8% y/y in December to 6% y/y in January. While the January inflation print is good news, it is likely that the BoE will want to see clear signs of cooling wage growth before they are tempted to pause rate hikes. 

Inflation in Saudi Arabia ticked up to 3.4% y/y in January from 3.3% y/y in December. This was the highest inflation print since mid-2021. A significant contributor to the January figure was an almost 20% rise in apartment rents. With the housing, water and fuels sub-component making up just over a quarter of the consumer basket, the rise in apartment rents meant that this component rose 6.6% y/y.   

Today’s Economic Events and Data

  • 17:30 US Initial jobless claims Feb 11: Forecast 200K
  • 17:30 US Housing starts Jan: Forecast 1355K
  • 17:30 US PPI Jan: Forecast 0.4% m/m

Fixed Income

  • US Treasuries extended their post CPI losses overnight with yields rising across the curve. Yields on the 2yr UST added about 2bps to settle at 4.6309% while 10yr yields rose by 6bps to 3.8049%. European markets moved in tandem with USTs with yields rising across French, German and Italian 10yr bonds. Gilts were the relative outperformer with yields down 3bps as the moderate slowdown in UK inflation may raise hopes that the Bank of England won’t need to hike as aggressively going forward.
  • Sharjah priced a USD 1bn 9yr sustainable issue at +280, tighter than initial guidance. The funds will be used per Sharjah’s sustainable financing framework.


  • The dollar was stronger against most peers overnight thanks to a steady string of better than expected data from the US. EURUSD fell by 0.5% overnight to close at 1.0689 while GBPUSD fell almost 1.2% to 1.2030 as the softer than anticipated UK inflation pared back BoE hike expectations. USDJPY added 0.8% to 134.16.
  • Commodity currencies also edged weaker with USDCAD rising by 0.4% to 1.3394 while AUDUSD fell sharply, down 1.2% to 0.6903. NZDUSD followed its antipodean peer lower, down 0.9% at 0.6281.


  • Wednesday was generally positive for equity markets as indices around the world enjoyed a risk-on rally. In the US, the NASDAQ was the biggest gainer as it added 0.9%, followed by the S&P 500 (0.3%) and the Dow Jones (0.1%).
  • In Europe there was a new record high for the FTSE 100 which ended the day 0.6% higher at 7997.83, just shy of the 8,000 mark through which it had broken earlier in the session. The DAX gained 0.8% and the CAC 1.2%.
  • Locally, the DFM gained 0.1% but the ADX closed 0.3% lower. The Tadawul gained 0.7% while in Turkey the Bist ended the day 9.9% lower after it resumed trading after its week closure following the earthquakes in Turkey.


  • Oil prices were moderately lower overnight with Brent futures down 0.2% at USD 85.38/b and WTI dropping by 0.6% to USD 78.59/b. Data from the EIA showed an enormous build in US crude inventories, up by 16m bbl last week thanks to heavy deliveries into the Gulf Coast region. Gasoline stocks also moved higher. US oil production was unchanged.
  • The IEA revised up its demand growth forecast for 2023 by 500k b/d to 2m b/d. The agency cited the reopening of China’s economy as a main factor in supporting the stronger growth expectations. The IEA also pointed to the resilience of Russia’s oil production and exports in the face of sanctions from the EU and G7 countries.

Written By

Jeanne Walters Senior Economist

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