Durable Goods Orders Confirm Rate Hike Bias (page 1 of 2)

UK Gross Domestic Product (QoQ) (4Q 2) (09:30 GMT; 04:30 EST)

Consensus: 0.6%
Previous: 0.4%

Outlook: Europe's second largest economy is expected to have expanded at its fastest pace in a year in the fourth quarter as a strong services sector and a rebound in consumer spending picks up some of the slack from the slump in the industrial group. Industrial production in the fourth quarter fell into its second recession in three years with the final month reporting a 2.7 percent, annually-based contraction.

Producers have been hit particularly hard by soaring input costs and softening demand from consumers as confidence cools with the economy. However, there were means for growth in the period. Services, which account for nearly three quarters of the economy, were running at a strong clip in the final three months of the year. A 0.9 percent growth in the sector helped continue its support of the 54 consecutive quarters of growth the UK economy can claim fame to.

Spending by consumers also picked up for the period according to preliminary figures. Retail sales, comprising nearly 40 percent of consumption, expanded for the five consecutive months in December despite a precipitous drop in consumer's optimism. With the economy quickening its pace of growth, speculation of a second rate cut to follow the one made on August has declined significantly. With growth picking back up and spare capacity becoming visible in the economy, there is little demand from the MPC to entertain another rate cut to spur growth.

Previous: UK growth in the three months ending September slowed slight to 0.4 percent, following the third quarters 0.5 percent pace, as business spending detracts from strong figures in consumer spending and the housing market.

Businesses, feeling the pressure of a stingier consumer and steadily increasing energy prices, reported weaker numbers for the quarter. Corporate investment edged only 0.3 percent higher in the three months compared to a 1.3 percent rate in the second quarter on the outlook of shaky profit margins. Industrial production was hit especially hard with an average 1.4 percent decline for the same period.

Offsetting this components weakness somewhat however were the first inklings of the reemergence of consumer confidence, and with it spending. Sentiment was massaged by a jobless rate at an over 10 year low housing prices picking back up from what was initially thought the deflation of the bubble formed over the previous years. Consumers increased their purchasing habits by 0.5 percent in the third quarter on the back of 0.2 percent and 0.1 percent in the second and first respectively.

KOF Swiss Leading Indicator (FEB) (10:30 GMT; 05:30 EST)

Consensus: 1.25
Previous: 1.22

Outlook: Switzerland's leading economic indicator is set to improve for the tenth consecutive month in February according to economists' consensus of a 1.25 read. Expectations derived from the six elements comprising the indicator continue to benefit from strong data coming at the end of 2005 that drove the Swiss economy to expand 1.3 percent for the year.

With business leaders and consumers expecting their spending habits to expand into 2006, they are already setting the foundation for the government's expectation of 1.8 percent expansion this year and even SNB President Roth's forecasted 2.0 percent. And expectations are already being met.

The pull back in energy prices recently has facilitated stronger demand both domestically and abroad which in turn has provided Swiss businesses with new orders and consumers with more jobs and bigger bank accounts to keep the economy chugging along.