Bank of America Merrill Lynch - "The week ahead:
Euro-area PMIs and the German ifo will give an indication of how the real economy has started the new year. We expect no further deterioration, but rather a stabilisation of economic activity.
Next week has a busy UK data calendar. We think the December Public Finances data (Tue 22nd) may show the fiscal deficit broadly unchanged from last year at around £15bn, with the government set to borrow around 8% of GDP in financial year 2012-13. The minutes from the BoE’s January meeting (Wed 23rd) should show an unchanged vote from December, with a unanimous decision to leave Bank Rate at 0.5% and David Miles voting for a £25bn expansion of QE.
The main focus of the week is likely to be on the preliminary estimate of Q4 GDP (Fri 25th). Monthly data to November for industrial production and construction output suggest a notable fall in the former may have been largely offset by a robust gain in the latter. Monthly data for the services sector is only available to October, which can contribute significantly to GDP growth surprises (Chart 2). Overall, we think that output in the services sector may have been broadly flat in Q4, resulting in a small fall in aggregate GDP of around 0.1%. The BoE’s November Inflation Report factored in a broadly similar fall in GDP, though we would put the skew of risks to our estimate to the downside."