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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.
Central bank meetings in Australia and India will be closely
watched post the Fed meeting while comments from Federal Open
Market Committee (FOMC) speakers are also in focus. Meanwhile,
inflation figures from Germany, mainland China, Taiwan and the
Philippines will be assessed for indications of inflationary
pressures, especially in gauging any impact from the easing of
COVID-19 restrictions in mainland China. December output data from
the UK are also a highlight for the coming week, with UK
recruitment data also likely to be of value in assessing the next
move by the Bank of England. In the eurozone, Germany's inflation
and industrial performance come under scrutiny.
The market has been squarely focused on two key themes of late,
namely the Fed's inflation fight and China's reopening. Both have
seen developments that supported risk-on behaviour in the past
week.
Specifically, above-consensus China NBS PMI surveys were
followed by indications of shallower a rate of decline in the
Caixin China General Manufacturing PMI, outlining improvements
of conditions in the Chinese economy after the easing of COVID-19
restrictions. This is while price pressures remained largely muted
in the manufacturing sector, even with the Lunar New Year holidays
in play. All of which should be music to the ears of equity
investors fearing renewed reopening price pressures. Next week's
PPI and CPI data from China will be watched for confirmation of the
dovish price trend.
Meanwhile the first FOMC meeting of the year concluded with US
equities trading higher despite caution from Fed Chair Jerome
Powell. The perception that the Fed had started to acknowledge
progress in their inflation fight, previously affirmed by survey
and official inflation gauges, lifted equity prices with the
S&P 500 index's IT sector closing with more than 2.0% gains on
Wednesday. Financials were left behind, however, alongside energy
shares. This is largely mirroring the sector performance in
accordance to
December's US sector PMI data. Next week's global sector data
will therefore be of interest to gain insights into differentials
in sector performance across the globe.
Are we nearly there yet? Rate hike path likely to cool subject
to China data.
The past week saw further rate hikes from the FOMC, Bank of
England and ECB, adding to the largest tightening of monetary
policy seen in the developed world in recent history. The hikes
totalling 125 basis points came despite signs of cooling headline
inflation and persistent, albeit moderating, recession risks. A
glance at how this tightening compares with leading survey data on
output and prices suggest that we are close to calling the top of
the rate hike tightening path.
However, much will depend on the impact on global inflation from
China's reopening. On one hand, the relaxation of COVID-19
restrictions is likely to boost global supply of many goods and
inputs, helping further cool worldwide inflationary pressures. On
the other hand, resurgent demand from a busier economy on the
Chinese mainland could stimulate higher commodity price inflation.
Copper, for example, is already showing signs of rising amid
expectations of stronger future demand. However, demand elsewhere
in the world is showing further signs of moderating amid higher
borrowing costs.
Whether improving supply trumps stronger demand in the inflation
equation remains to be seen, which is why early data such as this
week's Chinese inflation numbers will be so eagerly awaited by the
markets.
Key diary events
Monday 6 February
New Zealand, Malaysia Market Holiday
Australia Retail Trade (Q4)
Thailand CPI (Jan)
Germany Industrial Orders (Dec)
Germany Consumer Goods (Dec)
Eurozone S&P Global Construction PMI* (Jan)
Germany S&P Global Construction PMI* (Jan)
Eurozone Sentix Index (Feb)
United Kingdom S&P Global/CIPS Construction PMI* (Jan)
Eurozone Retail Sales (Dec)
Germany CPI (Jan, prelim)
Indonesia GDP (Q4)
S&P Global Sector PMI* (Jan)
Tuesday 7 February
Japan All Household Spending (Dec)
Australia Trade Balance (Dec)
Philippines CPI (Jan)
Australia RBA Cash Rate (Feb)
Malaysia Industrial Output (Dec)
Switzerland Unemployment Rate (Jan)
Germany Industrial Output (Dec)
United Kingdom Halifax House Prices (Jan)
Norway Manufacturing Output (Dec)
Switzerland Forex Reserves (Jan)
Taiwan Trade (Jan)
United States International Trade (Dec)
Canada Trade Balance (Dec)
S&P Global Metals and Electronics PMI* (Jan)
Wednesday 8 February
Thailand BOT Meeting Minutes
Japan Current Account Balance (Dec)
India Repo and Reverse Repo Rate
United Kingdom KPMG / REC UK Report on Jobs* (Jan)
United States Wholesale Inventories (Dec)
Thursday 9 February
Taiwan CPI (Jan)
United States Initial Jobless Claims
Friday 10 February
Australia RBA Monetary Policy Statement (Feb)
China (Mainland) CPI and PPI (Jan)
United Kingdom monthly GDP, incl. Manufacturing, Services and
Construction Output (Dec)
United Kingdom GDP (Q4, prelim)
United Kingdom Goods Trade Balance (Dec)
Norway Consumer Price Index (Jan)
Canada Unemployment Rate (Jan)
United States UoM Sentiment (Feb, prelim)
Taiwan GDP (Q4, revised)
India CPI Inflation (Jan)
China (Mainland) M2, New Yuan Loans, Loan Growth (Jan)
* Press releases of indices produced by S&P Global and
relevant sponsorsmcan be found here.
Americas: US and Canada trade data, US UoM sentiment,
Canada employment figures
A light week for North American economic releases comes around
next week with trade figures likely to be the highlights from both
the US and Canada. Comments from Fed speakers in the week will also
be of interest.
Europe: UK output data, German CPI, industrial
production, eurozone retail sales
The UK releases GDP data for December, rounding off growth data
releases for the year. According to the
S&P Global / CIPS UK Composite PMI for December, output
remained in decline at the end of 2022, albeit at a shallower rate
compared to the month prior. This was nevertheless consistent with
modest GDP declines which we will be tracking with the release of
the official Q4 GDP reading. Recruitment industry survey data will
also help assess hiring and wage growth in the UK.
In the eurozone, Germany CPI and industrial orders and
production are in focus, with retail sales numbers also studied for
the consumption picture at the end of 2022.
Asia-Pacific: RBA, RBI meetings, mainland China, Taiwan,
Philippines inflation data
In APAC, central bank meetings in Australia and India will be
the highlights amid expectations of further hikes. Consensus
expectations currently point to a 25-basis point hike in India.
This was with the latest
S&P Global India Manufacturing PMI indicating strong sector
growth while selling price inflation remained historically
elevated.
Meanwhile mainland China's inflation will be watched closely for
indications of price development upon the easing of COVID-19
restrictions. Encouragingly, the
Caixin China General Manufacturing PMI revealed that selling
price inflation in the manufacturing sector eased on the back of
softening supply chain pressures. Taiwan's export performance will
also be eagerly assessed as a bellwether of global trade.
Special reports:
Global Factory Downturn Shows Signs of Easing as China
Re-opens - Chris Williamson
South Korea's Economy Faces Rising Headwinds in
2023 - Rajiv Biswas
Purchasing Managers' Index™ (PMI™) data are compiled by IHS Markit 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.
