ECONOMICS COMMENTARY — Jan 05, 2024
Week Ahead Economic Preview: Week of 8 January 2024
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.
US and China inflation data, UK November GDP and BoK meeting
Inflation updates will be in abundance next week, including from both the US and mainland China, while UK's November GDP figures will also be highlights. Meanwhile, the Bank of Korea will be the first APAC central bank to convene in 2024. Other data worth watching include industrial production figures from various economies while trade data out of both Germany and mainland China will be keenly anticipated.
Investors stepped into 2024 with some caution at the start of the year, fueled largely by uncertainty over the pace of and timing of potential policy pivots. Next week's S&P Global Investment Manager Index will therefore help shed light on any changes in investor sentiment after the turn of the year. This comes after US equity investors' risk appetite rose to a two-year high in December, with respondents of the IMI survey widely seeing gains for the S&P 500 index by end 2024.
In the data docket will also be US CPI figures for December, due Thursday. PMI prices data, with its leading-indicator properties for inflation, have hinted at some stickiness for US inflation at around current levels (see box). Amid expectations for the Fed to lower rates on the back of progress in the fight against inflation, the upcoming CPI reading will be important to help guide expectations. Also watch out for US trade and producer price data.
In the UK, November GDP data will be released on Friday. According to early indications from the UK PMI, output rose in the final two months of the year, allaying recession worries after GDP fell 0.3% in October. UK recruitment survey data will also be released on Monday, shedding light on labour market and wage conditions amid mounting pressure on the Bank of England to lower rates.
Eurozone recession worries have meanwhile mounted, putting the focus on updates to industrial production in Germany, France and Italy and unemployment across the single currency area.
Finally, the Bank of Korea will be convening on Thursday, January 11. No changes to monetary policy are expected, but the market will likewise be watching for signs of the central bank pivoting towards a rate cut.
US inflation cooling faster than expected
US inflation cooled faster than anticipated late last year. The core measure of personal consumption expenditures (PCE) price inflation showed prices fell 0.1% in November, taking the annual rate of increase below 3%. The core rate, of which 2% is targeted by the FOMC, fell to 3.2%, its lowest since March 2021.
Markets will be watching for whether this good news will be repeated in the coming week, which sees further inflation insights from the consumer price index (CPI). Annual CPI inflation cooled in November to 3.1% with a core rate stuck at 4%. Further progress lower is not a sure thing, especially as forward-looking survey data hint at some stickiness above the 2% level in the coming months.
The key area of stubborn price pressures remains the service sector, according to the PMI, where wage growth has led to companies further boosting their prices in December in order to maintain margins. Weak demand in manufacturing meanwhile appears to be providing a further disinflationary force on inflation, albeit to a lesser degree than in the summer (see our latest manufacturing PMI note here).
Coming months will be crucial in assessing how these factors play out, as well as how geopolitical issues could affect supply chains. However, in the meantime the Fed has indicated that it is now shifting to a position where, with core PCE already lower than it had anticipated, its policy stance is looking too restrictive. Hence early 2024 rate cuts are looking more likely, with markets now pricing in a 98% chance of the first cut having happened by May 2024.
Key diary events
Monday 8 Jan
Germany Trade (Nov)
Switzerland Inflation (Dec)
Eurozone Economic Sentiment (Dec)
Eurozone Retail Sales (Nov)
United States Consumer Inflation Expectations (Dec)
United Kingdom KPMG/REC Report on Jobs* (Dec)
Global Metal Users and Electronics PMI* (Dec)
Tuesday 9 Jan
Japan Household Spending (Nov)
Japan Tokyo CPI (Dec)
Australia Building Permits (Nov, prelim)
Switzerland Unemployment (Dec)
Germany Industrial Production (Nov)
France Balance of Trade (Nov)
Taiwan Trade (Dec)
Italy Unemployment Rate (Nov)
Eurozone Unemployment Rate (Nov)
Mexico Inflation (Dec)
Canada Trade (Nov)
United States Trade (Nov)
S&P Global Investment Manager Index* (Jan)
Wednesday 10 Jan
South Korea Unemployment (Dec)
China (Mainland) M2, New Yuan Loans, Loan Growth (Dec)
Philippines Trade (Nov)
Turkey Industrial Production (Nov)
France Industrial Production (Nov)
Italy Retail Sales (Nov)
Thursday 11 Jan
Australia Trade (Nov)
South Korea BoK Interest Rate Decision
Malaysia Industrial Production (Nov)
Italy Industrial Production (Nov)
South Africa Manufacturing Production (Nov)
Brazil Inflation (Dec)
Mexico Industrial Production (Nov)
United States CPI (Dec)
United States Initial Jobless Claims
United States Monthly Budget Statement (Dec)
Friday 12 Jan
Japan Current Account (Nov)
China (Mainland) CPI, PPI (Dec)
United Kingdom monthly GDP, incl. Manufacturing, Services and Construction Output (Nov)
France Inflation (Dec, final)
India Industrial Production (Nov)
United States PPI (Dec)
Saturday 13 Jan
China (Mainland) Trade (Dec)
Taiwan Presidential Elections
* Access press releases of indices produced by S&P Global and relevant sponsors here.
What to watch
Americas: US CPI and Canada trade data
Following the Fed minutes release from the December 2023 Federal Open Market Committee (FOMC) meeting, where rate cuts were hinted for 2024, and the December payrolls update, the attention turns to December's CPI update on Thursday. According to consensus, both the headline and core CPI readings are expected to tick up slightly from November. This is in line with PMI prices data, where some stickiness in US CPI are to be expected around current levels based on leading indications. US PPI numbers will follow on Friday.
Separately, trade data from Canada will also be due in the week on Tuesday. Latest December S&P Global Canada Manufacturing PMI data showed that new export orders declined to the greatest degree for three-and-a-half years.
EMEA: UK output data, Germany trade and industrial production figures
In the UK, November's monthly GDP output data will be unveiled on Friday, including detailed manufacturing, services and construction sector activity figures. November PMI data indicated an overall expansion of UK private sector output, albeit led by the service sector. Meanwhile more up-to-date PMI data also showed UK economy ending 2023 on a more positive note. Also watch for an early labour market update via the KPMG / REC report on jobs, due on Monday and closely monitored by the Bank of England.
In the eurozone, Germany's trade and industrial production figures for November are expected in the week, with the HCOB Germany Manufacturing PMI having previously preluded further weakness in the goods producing sector, though export orders fell at a slower rate in November.
APAC: BoK meeting, mainland China inflation, trade
In APAC, the Bank of Korea kicks start the year with the first monetary policy meeting in the region, though no changes are expected. Some recognition of the risks of prolonged monetary tightening had been signalled by BoK Governor Rhee at the start of the year, however, and the meeting rhetoric will be keenly watched.
Inflation and trade figures from mainland China will also be due in the week with muted inflation conditions signalled for the manufacturing sector according to the Caixin PMI. Goods export orders have also declined at a slower rate, according to the PMI data.
Special reports
Global factory job losses gather pace as demand weakness persists at close of 2023 - Chris Williamson
APAC economic outlook for 2024 remains bright - Rajiv Biswas
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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.
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