Economic preview: US shutdown and GDP updates

While the flow of economic data releases slows down this week, and doesn't gain momentum again until after the New Year, there remains some interesting and important macroeconomic events over the next two weeks.

Not least the question over whether the US will be able to keep its Federal services operating over the Christmas period, given the risk of a government shutdown.

US government shutdown limit

Congress has until midnight on Friday, 22 December to avoid the shutdown, for which it must either approve a further stopgap continuing resolution, or a full spending plan.

There's little evidence that investors are concerned that a shutdown would endanger economic progress: US stocks are higher and the dollar has barely moved since the last continuing resolution, voted through on 7 December.

Nevertheless - a failure to come to terms would have dire consequences and with President Trump's tax bill as a possible bargaining chip, anything could happen.

A default by the US government on its debt obligations would be unthinkable, but during Trump's short time in office surprises have been two-a-penny.

US retail sales have been strong in recent months and could help lift PCE inflation: PA Images

US inflation

The dollar's progress this year has been stifled by the stubbornly low readings in the Federal Reserve's favoured inflation measure personal consumption expenditures (PCE).

Consumer price inflation (CPI) has not been a problem. Headline CPI rose at an annual rate of 2.2% in November, data published last week showed, up from 2% in October.

Retail sales have also been strong in recent months and last week November sales, which took in the post-Thanksgiving shopping spree, showed further forecast-beating growth.

However, it's PCE that has been the sticking point for the Fed, and why the central bank's interest rate increases this year have been undertaken with little conviction.

The dollar, therefore, could get a real boost if headline PCE rises significantly from the annual rate of 1.4% recorded in October. The November figures are published on Friday.

Robust UK manufacturing has helped contribute to rising growth, but GDP remains subdued: PA Images

GDP updates - UK and US

Preliminary results on UK economic growth showed gross domestic product rose 0.4% in the third quarter, taking the annual growth rate to 1.5%.

The UK economic recovery is accelerating, but at a glacial pace and no revisions are expected at Friday's second GDP reading for the July-September period. The pound and UK stocks would likely get a boost if growth is revised higher.

This comes in marked contrast to US economic expansion, where the annual rate of growth rose to 3.3% in the third quarter from 3% in the second. Again, no revisions are expected on Thursday, but the dollar would almost certainly climb out of its torpor if upward revisions are made.

The best of the rest 18-22 December

The Bank of Japan is highly unlikely to make any monetary policy changes at its rate-setting meeting on Thursday, but further signs the committee is encouraged by economic growth would likely lift the yen.

On Friday, durable goods orders from the US are seen rebounding in November from October's levels.

European consumer price inflation is expected to pick up in November after some months in the doldrums.

Christmas week 25-29 December

In the UK on Wednesday, 27 December the British Banking Association publishes mortgage approvals data for November, while the US reports data on pending home sales for the same month. Industrial production data from Japan is also published on Wednesday.

On Thursday, the Nationwide Building Society publishes its house price survey for December, while wholesale inventory data is reported in the US.

Economic calendar

US companies with results or trading updates in the next two weeks include Carnival, Nike, FedEx, General Mills and Burger King. In the UK they include Anglian Water, ICAP, Aberdeen Asset Management and Misys.