Day-by-day key economic data & macroeconomic events

Today:
Contrasting the improvement in the PMIs, Japan’s economy watchers survey signalled a slight deterioration in economic conditions at the start of the year, due to a worsening in the food and beverage industry. But household-related demand for services and corporate-related demand improved to a three-month high. While the headline current conditions index fell in January (48.6) and remained below the key-50 ‘unchanged’ benchmark, it was still above the long-run average (45.4) and slightly firmer than the average in each of the previous three quarters. Economy watchers expect only a slow recovery over the near term, reflecting ongoing concerns about the impact of rising prices. Meanwhile, the REC/KPMG survey flagged a further softening in the UK labour market at the start of the year, reporting the steepest decline in permanent job vacancies since August 2020 and the largest drop in temporary job placements since June 2020. As such, the survey pointed to the softest pay growth since spring 2021. Finally, aside from the data, ECB President Lagarde will give an update on the euro area economy and ECB policy to the EU Parliament.

Tomorrow:
Attention will be firmly on speeches from central bank policymakers, with Fed Chair Powell’s semi-annual monetary policy testimony to congress in the spotlight and to be watched closely for insights into the near-term policy outlook in light of recent trade-related announcements. Fed Governors Williams and Hammack will also give updates on the economic outlook. But while BoE Governor Bailey’s speech “Are we underestimating changes in financial markets?” might not touch on the near-term monetary policy outlook, we would expect the previously uber-hawk MPC member Mann to provide further insight into her decision to vote for a 50bps cut last week.

Wednesday:
The key focus will be the US CPI report for January. Consumer prices are expected to increase 0.3%M/M, reflecting upwards pressures from energy, food and core goods components. This would mark a slowdown from December (0.4%M/M) but nevertheless remain above the average rise in 2023 (0.2%M/M), to leave the annual CPI rate steady at 2.9%Y/Y. Core prices are expected to rise broadly in line with the average of the past year (0.3%M/M), which would take the annual rate down just 0.1ppt to 3.1%Y/Y, the softest reading since April 2021 albeit still perhaps too high for policymakers’ comfort. In addition, the BLS will re-estimate seasonal factors for 2020-2024, which might also bring past revisions. 

Thursday:
The first estimates of UK GDP in Q4 and December are likely to illustrate the BoE’s gloomy economic assessment at last week’s MPC meeting. Economic output has broadly flatlined since the spring. And with activity in consumer-facing services and construction sectors likely to have been disrupted by adverse weather, seasonal illness and heightened uncertainty, we expect little to no growth once again in December. Overall, like the BoE, we think that the economy contracted by 0.1%Q/Q last quarter. In the euro area, industrial production data for December will provide further insight into the causes of the flatlining of that region’s GDP in Q4. Notwithstanding the possibility of a surprise from Italy (figures due Wednesday), but not least due to a marked drop in Germany, we expect aggregate euro area IP to have declined ¾%M/M in December, to leave it down around ½%Q/Q in Q4. In the US, PPI figures will likely be boosted by higher wholesale and food prices, with Daiwa America forecasting an above-consensus increase of 0.4%M/M. Certain components, including healthcare and airfares, will feed through to the closely-watched PCE deflators. In Japan, goods PPI inflation is expected to have edged up to an 18-month high (4.0%Y/Y) in January amid upwards pressures from energy prices and the weak yen exchange rate.

Friday:
In the US, retail sales and industrial production figures for January will provide an update on economic activity at the start of the year. A marked decline in new vehicle sales could act a drag on headline retail sales (-0.3%M/M). Excluding autos, sales are expected to have posted a further increase for a fifth consecutive month (0.2%M/M) although adverse weather likely reduced retail footfall. Meanwhile, industrial production is expected to have slowed (0.1%M/M) with a decline in factory working hours – possibly weather-related – suggesting a modest decline in manufacturing output (-0.1%M/M) to maintain the sideways trend of the past couple of years. Updated euro area GDP figures are expected to merely align with the initial estimate of zero growth. This release will be accompanied by employment figures for Q4, which are similarly likely to show little growth in the final quarter of last year.