ECONOMICS COMMENTARY — Mar 15, 2024
Week Ahead Economic Preview: Week of 18 March 2024
By Chris Williamson and Jingyi Pan
The following is an extract from S&P Global Market Intelligence's latest Week Ahead Economic Preview. For the full report, please click on the 'Download Full Report' link.
Fed, BoE, BoJ, RBA meetings and flash PMI data in focus
Central bank meetings across the US, UK, Japan, Australia, Brazil and various other economies unfold in the week, in addition to the highly anticipated flash PMI releases for March. At the same time, inflation figures due from the UK, Canada and Japan will offer hints on the latest price developments. Mainland China's January to February activity data will also be due while the US updates key housing market figures.
The March Federal Open Market Committee (FOMC) meeting will play a key role in guiding market rates expectations after US equities indices climbed despite higher-than-expected CPI readings for February. These market gains have been driven by brighter economic prospects, according to the latest S&P Global Investment Manager Index, which further revealed that money managers are expecting the S&P 500 index to have risen further by the end of 2024 compared to the recent record. However, central bank policy is still regarded a drag on the market according to investors, hinting at the potential for further Fed-induced volatility in the near-term. As such, the Fed's post-meeting rhetoric will be closely watched for indications on the timings for rate cuts.
Flash PMI data will meanwhile provide insights into whether inflation is likely to further ease via the prices sub-indices. As far as the US is concerned, February's PMI data pointed to US CPI lowering to around the 2% level in the coming months and March's flash PMI update will therefore be tracked to ascertain if things will stay that way.
Besides the Fed, the Bank of England and Reserve Bank of Australia meetings will also be tracked to gauge how soon rates cuts may come. In contrast, the Bank of Japan will be scrutinised on their readiness in exiting its negative interest rate policy regime, though a March move has not been ruled out by the market. Official CPI readings out of the UK and Japan will come in handy to assess rates expectations.
Finally, activity data out of mainland China including industrial production and retail sales figures for the opening months of 2024, will inform the market on growth conditions amid a 5% growth target set for the year. The latest S&P Global China Business Outlook has meanwhile showed that business confidence moderated at the start of the year.
Tracking inflation through the flash PMIs
Flash PMI data will be updated for the world largest developed economies as well as India in the coming week, and will be keenly eyed for both economic growth and inflation trends. The latter will be also assessed via supply chain disruptions.
Recent PMI data have shown global economic growth accelerating in the four months to February, reflecting faster rates of expansion in the US and UK alongside an easing of the downturn in the eurozone. Emerging markets have also sustained solid growth, led by India. Collectively, the data therefore help further allay recession worries, at least for the very near-term. Questions remain, however, as the sub-sector PMI data reveal that a key driving force of the upturn has been looser financial conditions. These are linked both to recent market highs, notably for equities, as well as expectations of lower interest rates later in 2024. If these financial conditions tighten, say on a further pull-back in rate cut expectations, the upturn could lose momentum.
What might cause such a reassessment of the rates outlook is the inflation picture. Here the PMIs brought mixed news. The good news is that disruptions to shipping in the Red Sea appear to have only had a short-lived and modest impact on supply chains, albeit generating some uplift to manufacturing prices on average via higher shipping rates. Overall good price inflation nonetheless remains very subdued by pandemic standards.
A more worrying inflation picture comes from service sector price, which the PMIs showed to have remained stubbornly elevated globally, and in fact accelerated in February amid faster rates of increase in the US, UK and eurozone. Rising wages have played a major role in lifting rates charged by service providers.
Central bankers hoping to cut rates soon will be wanting to see that these price pressures are reverting their cooling trends in the March flash PMIs as, so far this year, the surveys have generally supported the views of the hawks.
Key diary events
Monday 18 Mar
Japan Machinery Orders (Jan)
Singapore Non-oil Domestic Exports (Feb)
China (Mainland) Industrial Production, Retail Sales and Fixed Asset Investment (Jan-Feb)
China (Mainland) Unemployment Rate (Feb)
Malaysia Trade (Feb)
Hong Kong SAR Unemployment Rate (feb)
Eurozone Balance of Trade (Jan)
Eurozone Inflation (Feb, final)
Canada PPI (Feb)
Tuesday 19 Mar
Japan BoJ Interest Rate Decision
Australia RBA Interest Rate Decision
Japan Industrial Production (Jan, final)
Germany ZEW Economic Sentiment (Mar)
Canada Inflation (Feb)
United States Building Permits (Feb, prelim)
United States Housing Starts (Feb)
Wednesday 20 Mar
Japan Market Holiday
China (Mainland) Loan Prime Rate (Mar)
Germany PPI (Feb)
United Kingdom Inflation (Feb)
Indonesia BI Interest Rate Decision
South Africa Inflation (Feb)
Italy Industrial Production (Jan)
United States FOMC Interest Rate Decision
Brazil BCB Interest Rate Decision
Thursday 21 Mar
Australia Judo Bank Flash PMI, Manufacturing & Services*
Japan au Jibun Bank Flash PMI, Manufacturing & Services*
India HSBC Flash PMI, Manufacturing & Services*
France HCOB Flash PMI, Manufacturing & Services*
Germany HCOB Flash PMI, Manufacturing & Services*
Eurozone HCOB Flash PMI, Manufacturing & Services*
UK S&P Global Flash PMI, Manufacturing & Services*
US S&P Global Flash PMI, Manufacturing & Services*
New Zealand GDP (Q4)
Japan Trade (Feb)
Australia Employment (Feb)
Taiwan CBC Interest Rate Decision
Hong Kong SAR Inflation (Feb)
Switzerland SNB Interest Rate Decision
Turkey TCMB Interest Rate Decision
United Kingdom BoE Interest Rate Decision
United States Existing Home Sales (Feb)
Friday 22 Mar
Japan Inflation (Feb)
United Kingdom Retail Sales (Feb)
Germany Ifo Business Climate (Mar)
Canada Retail Sales (Jan)
* Access press releases of indices produced by S&P Global and relevant sponsors here.
What to watch in the coming week
Flash PMI for March due Thursday
March flash PMI data will be due on Thursday for major economies including the US, Eurozone, UK, Japan, Australia and India. The flash figures will be closely watched for the earliest indications of economic conditions in the final month of first quarter. Furthermore, these data will be assessed for inflation conditions after the global economic expansion acceleration was found to have been accompanied by rising selling price inflation in February, according to PMI indications.
Americas: Fed meeting, Canada inflation and US building permits, housing starts and home sales data
The March 19-20 Federal Open Market Committee (FOMC) meeting unfolds in the week with the focus on the Fed's rhetoric. No change in rates is expected according to consensus. This comes after Fed chair Jerome Powell stated that the Fed is "not far" from evidence showing that inflation is headed towards the 2% target, though the latest February CPI came in above consensus. Exactly how far away, and the qualifying factors needed for the Fed to move, will be in question. As far as March's S&P Global Investment Manager Index has shown, central bank policy is expected to remain a drag for US equities in the near term.
EMEA: BoE meeting, UK inflation and retail sales, German ZEW survey
Besides flash PMI data, the European focus will be on the Bank of England's rate setting meeting, which is preceded by UK inflation figures and followed by updated retail sales.
In line with the Fed, guidance from central bankers in the UK will be watched on when rate cuts will commence, with economists largely looking to mid-2024 as most likely. Inflation data will also help guide monetary policy expectations after PMI prices data preluded the likelihood for sticky-inflation in the near-term for the UK.
APAC: RBA, BoJ, BI, CBC meetings, Japan inflation, China industrial production and retail sales data
In APAC, central bank meetings will be in abundance with the focus on the Reserve Bank of Australia and Bank of Japan. The RBA is likewise expected to stay on hold, watching inflation as the market await the lowering of rates. Meanwhile March BoJ meeting could be the final meeting before the BoJ exit their negative interest rate policy regime, though reports have also pointed to a potential March move.
A series of data releases will also be keenly watched including Japan's inflation, as well as industrial production, retail sales and fixed asset investment data for mainland China for the January to February period.
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Purchasing Managers' Index™ (PMI®) data are compiled by S&P Global for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies, and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.
This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.
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