As we dive into the week’s financial happenings, there’s quite a lot on the agenda. Monday brings us the final Composite & Services PMIs from the Eurozone, the UK, and the US for December, along with Germany’s preliminary CPI figures and November’s US Factory Orders. Looking at Tuesday, we’ll see Swiss CPI data for December, the Eurozone’s Flash HICP, and both Canadian Trade Balance and US ISM Services PMI numbers, along with November’s JOLTS report. The FOMC minutes for December will be released on Wednesday, as well as German retail sales, Sweden’s CPIF, Australian CPI, and the US ADP report. Thursday will provide Germany’s trade balance and the Eurozone’s retail sales for November, alongside the latest US jobless claims. Finally, Friday rounds off with crucial data including the Norwegian CPI, labor market reports from both the US and Canada, the University of Michigan’s preliminary survey for January, Chinese CPI for December, and updates on new yuan loans.
Swiss CPI (Tuesday):
November’s inflation report clocked in at a 0.7% rise, narrowly missing the consensus forecast of 0.8% but still higher than October’s 0.6%. This slight increase preceded an unexpected 50 basis points rate cut by the Swiss National Bank (SNB), which also adjusted their short-term inflation outlook downward due to lower-than-anticipated inflation, particularly in oil products and food. Despite this, the SNB maintained a stable medium-term forecast, trimming the Q4 2024 projection to 0.7% from 1.0%, indicating an anticipated December reading close to 0.8%. The immediate attention on December’s figures is somewhat overshadowed by the focus on longer-term trends, with CPI expected to average a mere 0.2% in 2025’s second quarter before rising again. This suggests that more rate cuts could be on the horizon, although SNB Chairman Schlegel has described the return to negative rates as unlikely.
EZ Flash CPI (Tuesday):
For December, expectations are that the Harmonized Index of Consumer Prices (HICP) will see a slight uptick to 2.4% from November’s 2.2%, while the super core rate should hold steady at 2.7%. November saw the headline CPI rise to 2.4% due largely to base effects, with super-core inflation sticking stubbornly at 2.7%, and services inflation easing slightly to 3.9%. Investec anticipates this trend of energy and food driving headline inflation, while core rates remain stable, to continue into December. Should the data align with expectations, it would mean a slight underachievement against the ECB’s December projections and might amplify the calls for additional easing if weak economic data further supports this stance. Current market predictions for the ECB point to a 27 basis points cut by January’s meeting, with an accumulated 105 basis points decrease by the end of the year.
US ISM Services PMI (Tuesday):
It is projected that the Services ISM index will increase to 53.5 in December from November’s 52.1. Notably, S&P Global’s preliminary PMI data for the month showed a significant rise in service sector activity to 58.5, up from 56.1, with a boost in new orders not seen since March 2022. This growth is mainly attributed to the service sector, keeping inflation quiet, with prices rising at their slowest pace since mid-2020. While raw material costs soared in manufacturing, the service sector slowdown helped keep inflationary pressures reduced. Employment in services also saw a modest rise, yet businesses are cautious about expanding their workforce due to cost management.
FOMC Minutes (Wednesday):
During December’s meeting, the Federal Reserve cut rates to 4.25-4.5%—a predicted 25 basis points reduction. The decision wasn’t unanimous, with one member opposing the cut. Discussions indicated a readiness to be cautious on further rate adjustments, assessing incoming data and risks closely. The updated SEP reflected three significant points: raised median dot plots for 2025 and 2026, subtle core PCE inflation expectations adjustments, and a consistent unemployment outlook across forecasting horizons. Fed Chair Powell affirmed a steady economic strength and a solid labor market, emphasizing a less restrictive policy stance. While the decision wasn’t straightforward, it underscored careful consideration of bi-directional risks, indicating a slower pace of future rate cuts.
Swedish CPIF (Wednesday):
There’s no consensus number yet, but estimates from SEB suggest a year-on-year print of 1.18% for the headline CPIF, down from the previous 1.56%. November’s result exceeded Riksbank forecasts, attributed partly to base effects, leading them to opt for a smaller rate cut. The Riksbank alluded that an additional rate reduction could appear in early 2025, making December’s CPIF potentially pivotal for future monetary policy decisions.
Australian CPI (Wednesday):
For November, the Australian CPI is expected to inch up to 2.3% from October’s 2.1%. This increase, driven by jumps in food and housing prices, will be under close observation by the Reserve Bank of Australia (RBA) following indications that inflation risks might be subsiding. The central bank has expressed cautious optimism toward inflation projections moving closer to targets, with Governor Bullock noting the need for further data to refine future policy, without committing to a February rate change.
Norwegian CPI (Friday):
Ahead of the January 23 policy announcement, where no change in rates is anticipated, the November CPI-ATE was slightly above market expectations but aligned with the Norges Bank’s forecast. The bank’s projection for CPI-ATE in Q4 suggests the December figure should relax toward October’s 2.7% rate.
US Jobs Report (Friday):
Projections for the upcoming jobs report estimate that the economy added 150,000 jobs in December, a drop from November’s 227,000, with unemployment stable at 4.2%. These numbers are expected to normalize following disruptions from weather and industrial actions. While some labor market indicators fluctuate, there’s consensus that payroll trends will continue apace. In terms of wages, monthly growth is forecasted at +0.3%, with an annual rate stability. Robust wage growth could complicate further rate cuts, despite ongoing assertions from Fed officials that the labor market isn’t a primary inflation source.
Canadian Jobs Report (Friday):
This report will shed light on the direction of the Bank of Canada’s policy, leading up to their January 29 meeting. Currently, there’s anticipation of easing, but the central bank has signaled a tempering of its rate cut pace. The previous jobs data showed a rise in unemployment rates, though it’s not yet indicative of a broader recession, which the BoC isn’t expecting.
Chinese CPI (Friday):
December’s CPI is anticipated to stay flat at 0.2% year-on-year, with the PPI possibly ticking up slightly. This reading will provide crucial insights into China’s economic backdrop, amidst ongoing tepid domestic demands and recently implemented stimulus measures.
Originally published on Newsquawk, this sweeping financial overview captures the week’s projected economic indicators that may influence key policy decisions and market sentiment worldwide.
