Japanese consumption indicator to see payback for recent strength; surveys to provide an update on conditions at the turn of the year
After today’s quiet start to the week in Japan, tomorrow will provide an update on household consumption in the middle of Q4, with the BoJ consumption activity index likely to see some payback for the strengthen seen in October (last week’s MIC expenditure survey saw total spending fall 1.2%M/M in November). Wednesday will see various surveys update on conditions at the turn of the year, including the BoJ’s Regional Economic Report, Reuters Tankan and Economy Watchers, which seem bound to flag downside risks in light of the resurgence in the pandemic. Meanwhile, Friday’s release of goods PPI will likely see a slight moderation in producer price inflation in December from a near-four-decade high of 9%Y/Y previously due to an easing in energy inflation. But factory gate prices of consumer goods might have continued to rise to the highest in more than three decades.

Chinese data this week focus to be on inflation and trade
This week brings some top-tier Chinese releases starting on Wednesday with December inflation numbers.

Headline CPI inflation is forecast to have largely reversed the 0.8ppt increase to 2.5%Y/Y in November, which principally reflected food and fuel prices. Indeed, core inflation (ex food and energy) is likely to be little changed from the 1.2%Y/Y rate recorded in November. Producer price pressures look set to ease slightly too, with the headline rate expected to have fallen more than 1½ppts to 11.3%Y/Y in December. Meanwhile, the December trade report – due Friday – is likely that growth in both exports and imports should remain firm on a Y/Y basis close to the 22%Y/Y and 32%Y/Y rates recorded in November, in part reflecting the low base a year ago.

Euro area labour market, IP and trade numbers due this week
The week’s euro area data flow will kick off this morning with the latest euro area unemployment figures for November, which are expected to report a further decline in the unemployment rate by 0.1pt to 7.2%, just above the series low reached at the onset of the pandemic when many jobless workers found it difficult to search for work. These will be followed by a more detail breakdown of labour market conditions in Thursday’s quarterly labour force survey for Q3. Following last week’s predicatable deterioration in the Commission’s sentiment indicator in December, the euro area Sentix survey for financial investors will today provide an update on market-participant sentiment at the start of the New Year.

Today will also bring the latest industrial production numbers from Ireland, ahead of the equivalent Spanish and euro area numbers published tomorrow and Wednesday respectively. Following last week’s weaker than expected figures from Germany and France, aggregate euro area industrial production growth is expected to be minimal following the rise of 1.1%M/M in October. Euro area trade figures for November, due to be published on Friday, are expected to reveal that the trade surplus moved sideways, after falling to an eighteen-month low of €2.4bn in October due not least to higher energy prices. Friday will also bring Germany’s full-year GDP figures for 2021, expected to report disappointing growth of 2.7%Y/Y following the drop of 5.0%Y/Y in 2020. Tomorrow will bring the Bank of France’s December sentiment survey, which will provide an update on its estimate for Q4 GDP.

UK November GDP report to suggest rebound in activity, perhaps to pre-pandemic level
The UK data highlight this week will be Friday’s GDP report for November. High frequency data suggest that private sector services activity picked up, while retail sales recorded another month of strong growth. Additionally, a surge in the provision of booster vaccinations seems likely to have supported the heath sector again. And with a modest pickup in manufacturing output also anticipated, an acceleration in GDP from the disappointing 0.1%M/M rate recorded in October is likely, with growth of 0.5%M/M to be sufficient to return output back to its pre-pandemic level. Friday will also bring November’s trade data. Ahead of this, the dataflow brings the BRC retail sales monitor (tomorrow), the REC/KPMG report on jobs and RICS residential survey (Thursday), all for the month of December.

US inflation data on Wednesday to be to be watched as will Friday’s IP and retail sales reports
Ahead of the Fed’s FOMC meeting later this month, a key release in the US this week will be Wednesday’s December CPI data. With energy and food prices expected to have remained elevated, Daiwa America’s Mike Moran expects consumer prices to have risen 0.4%M/M in line with the Bloomberg consensus. As such, the annual pace of inflation is likely to have accelerated to 7.0%Y/Y for the first time since the early 1980s. But supply-demand imbalances are likely to be evident in the core component too, where the expected monthly increase would mark the sixth increase of 0.4%M/M or more in the past nine months to leave the annual rate jumping close to 5½%Y/Y. Friday’s retail sales and IP reports will also be of note, with total sales expected to have risen in the run up to Christmas, albeit the increase will be limited by a dip in new auto sales and lower gasoline prices. Mike forecasts growth of 0.2%M/M in total sales but growth of 0.4%M/M ex autos. Meanwhile, manufacturing output is expected to have maintained an upwards trend at the end of the year, marking the third consecutive increase as supply constraints ease. Other data due include December’s NFIB small business optimism (tomorrow), Fed Beige Book (Wednesday) and the flash January University of Michigan consumer survey (Friday).