Market Round-Up

Economic indicators that report the health and confidence of an economy look to be fairly positive across the Eurozone for December, despite recessionary fears amongst economists. Unemployment data reported record low levels for a second month in a row, with Spain, Italy and France helping retract levels, indicating a very active labour market heading into 2023. Such sustained levels of low unemployment, aided by declining Consumer Price growth, increases in German production output levels and a rally within European financial markets all suggest the economy could be more resistant to an economic downturn than originally thought.

Although low unemployment levels look to be good for workers and economic growth, they also bring additional issues for inflation control, which is managed by the European Central Bank (ECB). As production output increases, momentum within businesses across the Eurozone could look to spur workers to strive for higher wages as they see their firm doing well. However, if pay increases are given, employers often seek to adapt prices and wage policies to a rising price environment in order to maintain margins. With such a tight labour market across the Eurozone, any increase in wages across Europe could likely increase the risk of a second spike in inflation if the ECB doesn’t keep the economy under control.

In 2022 as a whole, UK online retail sales fell 10.5% year-on-year – a record low for retail growth. A rather gloomy year for retail was further expressed in December as recent surveys reported that UK consumer spending for the month failed to keep pace with inflation, despite the festivities of Christmas and a World Cup. With inflation at its highest rate in over ten years, the rising price level of general goods and services looks to have taken a tight grip on UK consumer spending habits. Data from the British Retail Consortium (BRC) and Barclaycard showed spending rose by 6.9% and 4.4% in value terms respectively in December, falling significantly below the 10.7% November inflation rate. One of the biggest sectors to suffer was e-commerce, seeing a 12% decline in sales compared to the same month last year as a result of continued strike action and uncertain parcel delivery dates ahead of Christmas. According to Barclays, which gathers figures from almost half of the UK’s credit and debit card transactions, outgoings on utilities climbed 40.6% in December as households left the heating on for longer and the cost-of-living crisis resulted in the cancellation of subscription services and a reduction in spending on gifts and leisure activities for the month.