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Week Ahead Economic Preview

22 December 2017 Bernard Aw

As the final week of 2017 arrives, analysts will assess updated Japanese and German inflation data for clues on future policy moves. Other key data releases are US housing statistics and wholesale inventories, as well as China's industrial profits figures.

Japan and Germany inflation

Japan watchers will monitor the inflation data next week to gauge the extent to which prices have moved in the fourth quarter. Consensus expectations are for annual growth of 0.8% in November, still far below the Bank of Japan's target of 2%. The BOJ held monetary policy unchanged at its latest meeting, as widely expected, but sounded upbeat on the economic recovery and expressed confidence that inflation will return to target.

The BOJ's upbeat mood was reflected in business survey data. Flash Nikkei PMI data signalled that Japanese manufacturing sector is enjoying the best quarter in nearly four years. However, while the survey data indicated another steep rise in cost pressures, goods producers remained reluctant to pass on most of the higher costs to customers, underlining the difficulty faced by the central bank to meet its inflation target.

Meanwhile, Germany sees the release of preliminary inflation data, which will give hints as to broader price trends in the euro area. November figures showed an annual rate of 1.8%. Flash Eurozone PMI also hinted at rising core inflationary pressures as we move into 2018, which should continue to add to expectations of a tighter monetary policy.

China industrial profits

Industrial profits data for China are a focal point next week, given a broad government crackdown on financial risks. November PMI data indicated a faster rate of increase in output prices, which portends a slight pickup in industrial profits.

Meanwhile, the first batch of IHS Markit manufacturing PMI surveys will be released for Russia and Austria next week, with the bulk of the 40-plus countries covered to be published from January 2nd onwards.

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Bernard Aw, Principal Economist, IHS Markit
Tel: +65 6922 4226
Bernard.Aw@ihsmarkit.com

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