Japan consumer confidence edges marginally higher
Contrasting with expectations, the latest Japanese consumer confidence survey suggested a modest easing in pessimism heading to the end of last year. In particular, the headline sentiment index rose 1.7pts in December to 30.3, a three-month high, but nevertheless leaving the quarterly average some 1.6pts lower in Q4. With households a touch more upbeat about employment expectations – the survey index rose 2.6pts to a three-month high – they were seemingly the most willing to make major purchases since August. Admittedly, the relevant index was up from a series low in November and was therefore still trending some 1½pts lower in Q4 and 18½ pts below the long-run average, suggesting still little appetite for big-ticket purchases at the end of last year.

Japanese new car sales remain weak on subdued demand and supply constraints
A combination of subdued demand and ongoing supply constraints resulted in a disappointing end to the year for Japan’s auto sector, with new vehicle registrations down 4.4%Y/Y in December to the weakest year-end level since 2010. The drop in new car sales was steeper at 5.5%Y/Y, to leave full-year sales down more than 7%Y/Y and more than a fifth lower than in 2019.

German trade surplus widens to 10-month high as import values fall sharply
Germany’s goods trade surplus rose to €10.8bn, its biggest in ten months in November. The cause was a third successive drop in the value of goods imports, of 3.3%M/M, the most since January, to the lowest level since April. Imports from other euro area countries were particularly weak (down 6.5%M/M). The value of goods exports fell too, and for the second month in the three, albeit by just 0.3%M/M, with stronger shipments to the UK helping to offset weakness in US and Chinese demand. Compared to a year earlier, growth in the value of imports (14.7%Y/Y) still beat that of exports (13.3%Y/Y). However, over the first two months of Q4, the value of exports rose 1.2% above the Q3 average while the value of imports fell more than 3.5% on the same basis. That might suggest that net goods trade provided some welcome support to German GDP growth last quarter. However, the drop in the value of imports is highly likely in good part to have been driven by price effects, with data yesterday having reported the sharpest monthly drop in German import prices on the series (down 4.5%M/M) in November. Indeed, with German energy-intensive manufacturing output cut aggressively over recent months (down a whopping 12.6%Y/Y in October), import volumes of chemicals, metals and other goods produced in that sub-sector are likely to have picked up as substitute for items previously produced domestically.

Italian CPI and euro area PPI inflation in focus today
Ahead of tomorrow’s euro area HICP inflation estimates, focus today will be the flash Italian consumer price figures for December. While the Bloomberg survey consensus is for Italian HICP inflation to move sideways at 12.6%Y/Y, the figures from other member states suggest that the risks to this forecast are skewed to the downside. In addition, euro area producer price inflation numbers for November are due to report a second successive monthly decline amid weaker prices of energy and intermediate goods, to leave the annual headline PPI rate down around 3ppts from 30.8%Y/Y in October, which would be the lowest since 2021 and roughly 16ppts below August’s peak (43.4%Y/Y). Separately, the euro area construction PMIs for December are expected to suggest that activity in the sector continued to contract at the end of the year despite the mild winter temperatures.

UK new car sales accelerate in December but remain well below pre-pandemic levels
Contrasting with Japan and consistent with a pickup in car production in November (the Society of Motor Manufacturers and Traders (SMMT) reported annual growth of 5.7%Y/Y), SMMT today reported another notable increase in new car registrations in December, up around 18%Y/Y at 128k units. But this was still the second-lowest December reading since 2012 and left full-year sales roughly 2% lower than in 2021, around 30% below the 2019 level and 40% below the peak in 2016. While pandemic related backlogs might provide ongoing support over the near-term, with consumer confidence near historically low levels, and real disposable income declining, we do not expect to see a significant acceleration in car sales over coming quarters.

US job cuts, job claims and trade figures due for release
Ahead of tomorrow’s comprehensive US payrolls report, today will bring Challenger job cuts data for December, jobless claims figures for the last week of December, as well as the ADP employment report. However, we caution that the latter has been a poor guide to the official data over recent quarters. The full trade report for November is likely to confirm a notable improvement in the deficit, in line with the sizeable narrowing of the goods deficit in the flash release to the smallest in almost two years amid a plunge in the value of imports (-7.6%M/M). In addition, the final services and composite PMIs for December are scheduled for release – the flash release saw the services activity index drop 1.8pts to 44.4, the lowest since May 2020.