Helal Miah, investment research analyst at The Share Centre, explains what today's global economic updates mean for investors:
Employment data out of the UK suggest that the economy continues to make good progress as the unemployment rate fell to 5.1%, better than expected. However, the rate of wage growth still seems to be slowing down falling to 2% from the previous month's 2.4%. This along with an increasing number of people in self-employment, potentially forced to taking this option would suggest that there still remains some slack within the employment market. We would therefore agree with Mark Carney's comments yesterday that interest rate rise in mid-2016 is not yet called for, especially given the most recent bout of volatility in the stock market and the effect it could have on confidence.
This afternoon, the US have just published their December inflation figures which showed that on a month on month basis prices actually fell by 0.1%. This should not be too surprising given that accelerated fall in oil prices over the last month. Excluding food and energy, prices increases were still very moderate with just a 0.1% gain during December. This will naturally feed into the Fed's strategies for monetary policies which will no doubt bring down the number of rate hikes expected for this year. The market had anticipated 2-3 rate hikes during 2016, now, some are suggesting that we could just have 1 rate hike made towards the end of the year.
Recent macro-economic data suggests that both the UK and US economies will still grow, we just have to reduce our expectations of the pace of this growth given the troubles coming out of China and oil weakness. Given the recent market volatility, we suggest that investors should not panic, hold steady with their portfolios if it is well balanced. For some who have been wise enough to hold cash, this may be a good opportunity to pick up some shares at very good value.