Daily Economic Outlook—Jan 28

An initial estimate of the UK's Q4 GDP growth data that is due to be released today is likely to show a moderate growth of 0.5%. The expected 0.5% growth will be more than the 0.4% growth registered in Q3; however, it will only indicate 'trend' growth. The Q4 indicators that were released indicate no expansion in industrial production and a drop in construction output, showing that the only real growth driver is the service sector. Robust employment growth in Q4 indicates that the economic growth might be undervalued currently. However, this growth data will not pressurise the Bank of England to consider hiking rates early.

Meanwhile, the upcoming January CPI data for Germany will give an insight for the 'flash' estimate for the euro zone which will be out tomorrow. Both are likely to indicate moderate raise in annual 'headline' inflation as the effect of oil price decline in 2015 falls out. However, such an outcome is unexpected to temper the likelihood of additional stimulus by the ECB.

The US data for pending home sales and durable goods orders due today will give updates on economic activity. Meanwhile, the weekly initial unemployment claims will be closely watched for hints that payrolls growth might ease in January.