The annual rate of producer price inflation continued to grow in December 2016, although mainly as a result of falling prices a year ago, as growth was relatively flat on the month. Factory gate prices (output prices) rose 2.7% on the year to December 2016 and 0.1% on the month, which was the sixth consecutive period of annual growth and the eleventh of monthly growth. Prices for materials and fuels paid by UK manufacturers for processing (input prices) rose 15.8% on the year to December 2016 and 1.8% on the month.

Prime Minister Theresa May offered her most explicit vision of Britain’s future relationship with its European Union neighbors, pledging to quit the single market and instead seek a customs agreement with the bloc to deliver “a smooth and orderly Brexit. I know there are some voices calling for a punitive deal that punishes Britain and discourages other countries from taking the same path,” May said in her speech to diplomats in London on Tuesday. “That would be an act of calamitous self-harm for the countries of Europe. And it would not be the act of a friend.”

Laying out the government’s Brexit plans with 12 core objectives, May said that she was confident a deal can be reached with the European Union once the trigger to leave is pulled by the end of March. She called for a “phased approach” to implementing the new rules to ensure Brexit is “smooth.” May offered a series of other aims for the coming talks:

• She wants to recast membership of Europe’s customs union by maintaining tariff-free, friction-less trade with the EU, but without having to impose the same duties on non-EU countries
• The ability to negotiate new trade deals with countries outside the bloc
• She wants transitional arrangements for financial services and other companies so new rules are phased in over time
• No more “huge” U.K. contributions to the EU budget

Focus of the Wednesday's session was on UK job data. According to the latest release for September to November 2016: the unemployment rate for people was 4.8%; it has not been lower since July to September 2005. The unemployment rate for men was 5.0%, down from 5.2% for a year earlier, while the unemployment rate for women was 4.6%; it has not been lower since August to October 2005.

For December 2016 there were 797,800 people claiming unemployment related benefits. This consisted of: 527,800 people claiming Jobseeker’s Allowance, 270,000 people who were seeking work and claiming Universal Credit. For December 2016 there were 797,800 people claiming unemployment related benefits. This was: 10,100 fewer than for November 2016, what is 26,900 more than for a year earlier.

From the UK, on Friday, Retail Sales figures were released. Estimates of the quantity bought in retail sales increased by 4.3% compared with December 2015 and fell by 1.9% compared with November 2016. The largest contribution to the month-on-month fall came from non-food stores. The underlying trend remains one of growth with the 3 month on 3 month movement in the quantity bought increasing by 1.2%. Average store prices increased by 0.9% on the year and for all retailing excluding fuel prices increased by 0.1%; the first increase since June 2014. Online sales (excluding automotive fuel) increased year-on-year by 21.3%, but fell on the month by 5.3%; accounting for approximately 15% of all retail spending.

This week markets will be looking at:

EU Membership Court Ruling (Tuesday 10:30)

Prelim GDP (Thursday 10:30)