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The following is an extract from IHS Markit's latest Week
Ahead Economic Preview. For the full report, please click on the
'Download Full Report' link.
UK inflation, employment data, BoJ meeting and China data
A busy week ahead is lined with central bank meetings in
Japan and Malaysia while labour market and
inflation data from the UK will be in
focus. German ZEW survey figures and
eurozone consumer confidence numbers will also be
due while in APAC, China's data dump, including
Q4 GDP, Japanese inflation and
Australian jobs data will be highlights.
Attention will focus first on China's fourth quarter GDP
release, which is issued alongside details of industrial output and
retail sales for December. While PMIs were better than expected,
this was prior to the surge in COVID-19 cases, placing the emphasis
on flash January PMI data in the following week. Meanwhile, the
economy is expected to have slowed sharply in the final quarter of
the year amid COVID-19 disruptions. Any severe weakening of
production will be a cause for concern in relation to the global
supply crunch.
Attention then shifts to the UK. The BoE surprised markets by
hiking rates in December citing concerns over high inflation and
the resilience of the job market following the end of the
government's furlough scheme. Whether inflation has continued to
rise, having hit a decade high of 5.1% in November, and whether
jobs growth has been sustained - as indicated by recruitment
surveys - will likely be key factors in determining the timing of
the next rate hike.
In APAC, the Bank of Japan and Bank Negara Malaysia meet for the
first time of the year. No changes to monetary policy settings
expected but any comments on the potential impact of Omicron will
be assessed.
UK labour market in focus
After surging inflation in the US added to bets that the
FOMC would hike rates three times in 2022, next week's focus shifts
to the Bank of England. Having already started hiking rates back in
December, upcoming data will be scoured for clues as to the pace of
policy tightening in the coming year.
UK inflation has already risen to a decade high of 5.1%, and
soaring utility bills look set to drive it still higher in coming
months. The Bank is pencilling in 6% by April, but most economists
expect the pace to starting cooling in the second half of the year.
A rise in the upcoming CPI numbers will therefore be of little
surprise, or influence on policymakers. Instead, it is the labour
market which arguably needs to be watched more closely. The Bank's
concern is that inflation expectations are rising, which could feed
through to higher wage growth, meaning inflation stays
uncomfortably high for longer than currently anticipated. Such
concerns are fuelled by the prior release of official data showing
the number of unfilled vacancies having risen to 1.2 million while
unemployment was down to 1.4 million: an implied record low ratio
of job seekers to vacancies, pointing to a tight labour
market.
More timely recruitment industry survey
data showed the availability of staff deteriorating sharply
once again in the UK during December, albeit at the slowest rate
for eight months, pushing pay higher at a rate only marginally shy
of all-time records. What's more, Brexit and Omicron threaten to
lead to further labour supply shortages, driving costs and wages up
further, though both factors are also likely to stymie economic
growth. The juggling act for the Bank of England is to therefore
steer a suitable course for policy among these signs of persistent
inflation yet weakening economic growth, with the coming week's
labour market data are likely to play a key role in determining the
timing of the next move.
Key diary events
Monday 17 Jan
US Market Holiday
Japan Machinery Orders (Nov)
Singapore Non-Oil Exports (Dec)
China (Mainland) Retail Sales, Industrial Output and Urban
Investment (Dec)
China (Mainland) GDP (Q4)
Norway Unemployment (Jan)
Canada Manufacturing Sales (Nov)
Eurozone Finance Ministers Meeting
Tuesday 18 Jan
Malaysia Market Holiday
Japan BOJ Rate Decision (18 Jan)
United Kingdom Labour Market Report (Dec)
Germany ZEW Economic Sentiment (Jan)
Canada House Starts (Dec)
Canada CPI Inflation (Dec)
United States NAHB Housing Market Index (Jan)
Wednesday 19 Jan
Germany HICP (Dec, final)
United Kingdom Inflation (Dec)
United States Building Permits (Dec)
United States Housing Starts (Dec)
Canada Wholesale Trade (Nov)
Thursday 20 Jan
Japan Trade Balance (Dec)
Australia Employment and Unemployment Rate (Dec)
Germany Producer Prices (Dec)
Malaysia Overnight Policy Rate (20 Jan)
Taiwan Export Orders (Dec)
Norway Key Policy Rate (20 Jan)
Eurozone HICP Final (Dec, final)
United States Initial Jobless Claims
United States Philly Fed Business Index (Jan)
United States Existing Home Sales (Dec)
Friday 21 Jan
Japan BOJ Meeting Minutes (Dec 16-17)
United States Existing Home Sales (Dec)
New Zealand Manufacturing PMI (Dec)
Japan CPI, Core Nationwide (Dec)
United Kingdom GfK Consumer Confidence (Jan)
Thailand Customs-Based Trade Data (Dec)
United Kingdom Retail Sales (Dec)
Canada Retail Sales (Nov)
Eurozone Consumer Confidence (Jan, flash)
What to watch
North America: US housing market,
Canada inflation and retail sales figures
US existing home sales and housing starts
data will be released in the coming week. The tight housing market
situation will be assessed with the data. Consensus estimates
currently point to a figure comparable with the prior month for
December existing home sales.
Canada inflation and retail sales figures
will also be released with a focus on whether price pressures
showed signs of abating in the final month of 2021.
Europe: UK inflation, employment
and retail sales data, German inflation, ZEW survey figures and
eurozone consumer confidence
UK inflation data will be due next week
after the IHS Markit/CIPS UK Composite
PMI showed price pressures easing in December. Meanwhile strong
employment growth amid shortages of candidates were noted, hinting
at another set of positive employment figures to be released in the
coming week.
In the eurozone, eyes will be on the
January German ZEW survey as well as flash January consumer
confidence data from the eurozone. Final inflation figures from
Germany and the eurozone are expected to bring little surprises,
after preliminary data showed inflation in the region hitting a
record 5.3%.
Asia-Pacific: Bank of Japan
meeting, Japan CPI, Australia employment data, China Q4 GDP,
industrial output and retail sales figures
The focus in Asia is expected to be with
China's data release, as December's industrial output and retail
sales numbers are due following better than expected Caixin China
General Services and Manufacturing PMI numbers. Fourth quarter GDP
will also be due, with a slowdown to 2.3% from 4.9% in Q3 expected,
according to IHS Markit, linked to the ongoing pandemic impact as
China pursues a zero Covid policy.
Central bank meetings in Japan and
Malaysia are also set to take place though no changes are expected
from either in their respective first meetings of the year. Japan's
CPI data will receive an update for December following November's
surprises on the upside, whereby core CPI rose at the fastest pace
in nearly two years.
Special reports in full report:
Global Economic Growth Hit by Omicron but
Supply Tensions Ease - Chris Williamson
Purchasing Managers' Index™ (PMI™) data are compiled by IHS Markit for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies, and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.
