This week’s FOMC (Wed), BoJ (Thu) and BoE (Thu) meetings, and a meeting of the EU leaders will keep markets busy. Political developments in Germany, as the Bundestag holds a confidence vote today, will be watched closely.
We also have a number of manufacturing and services PMIs readings through today and the US empire manufacturing index print. UK employment figures, and US retail sales and industrial production will draw market focus on Tuesday. Eurozone and UK CPI prints, and US housing starts and the FOMC decision will be keenly followed on Wednesday. The BoJ and BoE rate decisions, and US revised GDP, existing home sales and jobless claims prints are due on Thursday. US personal income, spending and key PCE and sentiment readings end the week.
ECB chatter will garner interest this week. On Monday we have Lagarde, Simkus, Guindos and Schnabel all hit the wires. Rehn and Kazimir speak on Tuesday. Muller, and Lane speak at separate events on Wednesday. The ECB cut its policy rate by 25bps in a unanimous decision last week, removing previous language about maintaining a “sufficiently restrictive” policy and revising down GDP growth and inflation forecasts for 2024-2026. ECB President Christine Lagarde signalled potential further monetary easing, with the downward revisions to economic projections stemming from weaker investment data, export growth expectations, and lower oil and electricity price assumptions.
In the US the main event was the CPI report. In November, US consumer prices rose 0.3%, the largest monthly increase since April, driven primarily by shelter and food costs, with shelter expenses accounting for nearly 40% of the increase. The annual inflation rate reached 2.7%, up slightly from October’s 2.6%, and while this represents significant progress from the June 2022 peak of 9.1%, core inflation remained steady at 3.3%. US producer prices rose more sharply than expected in November, with PPI increasing 0.4%mom and 3.0%yoy, driven largely by a 0.7% rise in final demand goods prices. A significant portion of this increase came from food prices, highlighting ongoing volatility in certain consumer goods markets. Despite ongoing inflation concerns, markets anticipate the Fed will implement a third consecutive interest rate cut this week, with potential future inflation dynamics influenced by cooling rent costs, labour market changes, and potential policy impacts from the incoming administration.
Elsewhere, China’s latest economic data remained mixed. The property market showed potential signs of bottoming out, with fewer cities experiencing price declines. However, fixed asset investment softened, retail sales unexpectedly slowed, and discretionary consumption remained weak. Despite these challenges, industrial production remained stable. Policymakers signalled a more supportive fiscal and monetary approach for 2025, with increased government bond issuance and a potential shift towards moderately loose monetary policy. The government remains optimistic about achieving around 5% growth in 2024, with hopes pinned on stimulus measures to stabilise and stimulate the economy in the coming year.
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