Key economic data

Today:
Ahead of tomorrow’s flash December euro area inflation estimates, today will bring the equivalent release from Germany. Overall, the headline German HICP rate is forecast to rise 0.2ppt to 2.6%Y/Y, which would be the highest since July. But this should principally reflect unfavourable base effects in the energy component, as the 2.1%M/M decline in prices in December 2023 was not repeated last month. However, the first of the regional releases from Hesse surprised to the upside, with the respective CPI rate up a chunky 0.7ppt to a 12-month high of 2.7%Y/Y, suggesting risks of an overshoot to the national data too. Final services PMIs for December are also out in the major economies today. The final euro area index was revised marginally higher from the flash (by 0.2pt to 51.6), due to a substantial revision in France (by 1.1pt from the flash to 49.3). And thanks to very strong growth in services, the Spanish composite PMI leapt to its highest level since March 2023 (up 3½ppts to 56.8) to signal very firm expansion towards year-end. But this still left the euro area composite output PMI (49.6) consistent with stagnation in Q4. Additionally, the Sentix survey suggested that investors remained downbeat about the state of the euro area economy at the start of 2025 too. Meanwhile, the final UK services PMI was revised a touch lower from the flash (by 0.3pt to 51.1), with the composite PMI (50.4) the softest in 14 months to suggest that activity is moving broadly sideways at best.

Tomorrow:
The key release will be the euro area’s flash inflation estimates. Like the consensus, we expect the headline HICP rate to rise 0.2ppt to a five-month high of 2.4%Y/Y, reflecting base effects in energy prices. But importantly, in the absence of a surprise in today’s German figures, core inflation should remain well-behaved, with a fourth-consecutive reading of 2.7%Y/Y. Meanwhile, the euro area unemployment rate should remain unchanged in November at its historical low of 6.3%. In the US, the services ISM survey is expected to point to ongoing expansion at the end of 2024 (53.5), while the JOLTS release will provide insight into job openings and layoffs in November. Surveys will also provide an update on UK retail sales and construction activity in December. 

Wednesday:
The European Commission’s sentiment survey will likely remain consistent with stagnation (at best) towards the end of 2024, while German retail sales and factory orders data for November will likely reinforce the expectation that the economic performance in Q4 was the weakest of the major member states. One focus in the US will be the minutes from the December FOMC meeting, which should give more insight into the debate surrounding the decision to cut the FFR target range by 25bps to 4.25-4.50%, which Chair Powell had suggested was a closer call reflecting an upwards revision to the Fed’s GDP growth and inflation projections, a downwards revision to the unemployment rate, and a downward revision to the number of rate cuts expected by the median FOMC member in 2025. The ADP employment report and weekly jobless claims figures are also due.

Thursday:
The BoJ’s Branch Managers meeting and associated Regional Economic Report will be closely watched for potential signals ahead of the Policy Board meeting on 24 January, including insights into wage developments at Japanese SMEs ahead of the current Shunto pay negotiations. The monthly labour earnings figures for November are expected to show total wage growth ticking higher that month by 0.5ppt to 2.7%Y/Y, with regular wage growth for full-timers likely to be broadly steady at 2.9%Y/Y. Elsewhere in Asia, Chinese inflation figures are expected to remain extremely weak, with the headline CPI rate forecast to ease to just 0.1%Y/Y in December, while PPI inflation will remain firmly in negative territory (-2½%Y/Y). In Europe, euro area retail sales figures are likely to remain relatively subdued in November, while German industrial production data seem set to be dampened by the continuation of gloomy weather. Given its marked adverse impact on wind-generated energy production and the associated increase in wholesale energy prices, the so-called ‘Dunkelflaute’ had a profound impact on IP in October (-1.0%M/M), with expectations for only a moderate rebound in November. Finally, extremely mindful of still-strong pay growth but signs of softer demand for employees, the BoE will look for insights into UK labour market conditions from the KPMG/REC and DMP surveys.

Friday:
The main focus will be the US December labour market report. Non-farm payrolls are expected to have risen 160k, down from 227k in November. But this would still leave the average for 2024 at a solid 180k. In addition, the unemployment rate is expected to remain low and steady at 4.2%. Meanwhile, average hourly earnings are forecast to rise 0.3%M/M, a touch softer than in the previous two months, but nevertheless leaving the annual rate unchanged at 4.0%Y/Y. The University of Michigan consumer confidence survey for January is also due. In Japan, the BoJ’s consumption activity and household spending figures for November will provide an update on household consumption in the middle of Q4.