Key economic data

Today:
In an otherwise quiet start to the week for top-tier data, Chinese trade figures reported another strong increase in exports in December (10.9%Y/Y in CNY terms), possibly supported by front-loading of shipments ahead of an expected hike in US tariffs this year – exports to the US rose a ten-month high 15.7%Y/Y – and the earlier Lunar New Year holiday (29 January). With imports still very subdued (1.3%Y/Y), the trade surplus rose to a record high in December in both CNY (¥753bn) and USD ($105bn) terms. As such, net trade should provide a notable boost to Q4 GDP, with the data due to be published on Friday. Expected growth of 1.6%Q/Q would be the strongest for seven quarters, albeit still below the pre-pandemic average. This would take the annual rate to 5.0%Y/Y and full-year growth to 4.9%Y/Y.    

Tomorrow:
Ahead of Wednesday’s US CPI report, tomorrow will bring December’s PPI figures. Producer prices are expected to rise 0.4%M/M for a second successive month, in part reflecting a third consecutive increase in wholesale energy prices. Excluding food and energy, producer prices are expected to increase 0.3%M/M, in line with the average in the first 11 months of 2024. Overall, this would leave the annual headline and core PPI rates up around ½ppt to 3.5%Y/Y and 3.8%Y/Y respectively, which would be the highest for 22-months. In Japan, the economy watchers survey will provide an update on economic conditions heading into year-end – the headline index is forecast to rise modestly to a nine-month high – while a speech from BoJ Deputy Governor Himino will be watched closely for clues as to whether or not the Bank’s Policy Board is likely to raise rates again at next week’s BoJ Policy Board meeting.   

Wednesday: 
The key focus will be the December US and UK CPI inflation releases. Like the consensus, we forecast US consumer prices to increase 0.3%M/M for a second successive month. With higher prices of energy will likely offset by lower food, prices of core items are also expected to rise 0.3%M/M for a fifth consecutive month. Overall, this would leave headline CPI inflation up to a five-month high of 2.9%Y/Y, but core inflation steady at 3.3%Y/Y for a fourth successive month. In the UK, having risen to an eight-month high in November (2.6%Y/Y), we expect a slight moderation in headline inflation in December by 0.1ppt to 2.5%Y/Y, in line with the BoE’s forecast for the month. We also expect core inflation to ease, perhaps by a more marked 0.3ppt to 3.2%Y/Y thanks to temporary step-down in services price inflation. BoE MPC external member Alan Taylor – one of three dissenters who voted in favour of a 25bps cut in December – is due to make his first speech on the inflation outlook. Elsewhere in Europe, euro area industrial production looks likely to have grown only slightly in November having been flat in October, as a positive surprise in German industrial output was partly offset by the sharp decline in the frequently-volatile Irish data.

Thursday:
The UK’s monthly GDP figures for November will be watched for an ongoing lack of economic momentum. While some payback may be due for manufacturers and construction firms, whose output fell in October, November’s results seem likely to remain weak. We expect GDP growth to be only marginally positive on the month, perhaps around 0.1%M/M, thus remaining stagnant on a 3M/3M basis. In the euro area, Germany will publish estimates for full-year GDP growth in 2024, which are expected to confirm a second successive annual contraction after a broadly flat fourth quarter. Meanwhile, December’s ECB monetary policy account will be closely watched for any references to discussions surrounding the change to the Governing Council’s forward guidance (i.e. the removal of the reference to keeping “policy rates sufficiently restrictive for as long as possible”), and particularly whether any members expressed preference towards moving beyond neutral towards a more accommodative stance. In the US, December retail sales figures are expected to post a further solid increase (0.6%M/M), supported by a rise in new auto sales, higher gasoline prices and Christmas-related purchases.   

Friday:
Final estimates of euro area HICP inflation for December will be one focus at the end of the week. The flash estimates aligned with initial forecasts, reporting a further 0.2ppt increase in the headline rate to 2.4%Y/Y but a steady core rate at 2.7%Y/Y. But given the high-side reading of the headline rate to two decimal places (2.44%Y/Y), it will only take a very modest upwards revision to any of the final figures from the large member states – from France & Spain (Wednesday) and Germany & Italy (Thursday) – to invoke an upwards revision to the euro area HICP rate to 2.5%Y/Y. The final detail will also provide a granular breakdown to help explain the 0.1ppt uptick in services inflation, back to 4.0%Y/Y, and allow calculation of various measures of underlying inflation. In the UK, retail sales are expected to be boosted by Black Friday discounting, which was included in the December sample this year. Meanwhile, in the US, despite an expected increase in industrial production (0.4%M/M), this would still maintain a broadly sideways trend in place for the past two years. Finally, in Japan, the BoJ’s consumer opinion survey is also due.