Week Ahead Economic Preview

  • Worldwide release of IHS Markit Manufacturing PMI data will provide insights into global economic growth and price trends at start of 2018
  • The Fed decides on monetary policy
  • Q4 GDP data for euro area, France, Spain, Russia and Taiwan
  • US nonfarm payroll and PCE Price Index
  • Euro area inflation

Worldwide releases of IHS Markit Manufacturing PMI surveys will provide all-important, up-to-date signals of global economic growth and price trends at the start of 2018. A number of countries are also announcing fourth quarter GDP numbers for 2017, while markets will be on tenterhooks ahead of the Fed policy meeting, given the recent sharp dollar depreciation.

Other key data highlights include US nonfarm payrolls and PCE prices, eurozone jobs and inflation figures, as well as Japanese household spending and retail sales data.

Euro area growth and inflation

Preliminary estimates of euro area fourth quarter GDP figures are eagerly awaited by analysts, and are widely expected to be strong given the recent flow of positive data. IHS Markit PMI data signalled an impressive 0.8% expansion in the final three months of 2017, higher than the 0.6% in the third quarter.

Flash PMI surveys indicated that the eurozone also got off to a flying start in 2018. Updates to the final eurozone manufacturing PMI will reveal more details.

The European Central Bank meanwhile kept its monetary policy unchanged at its January meeting and sought to dampen expectations that it may soon rein-in monetary stimulus before it sees stronger evidence that the inflation target is achieved. As such, updates to inflation numbers will been keenly watched. Nevertheless, the strong start to the year signalled by the flash PMI has prompted many independent forecasters to up their growth of inflation projections, and as such will provide more ammunition to hawks on the ECB Governing Council in coming meetings.

No Fed hike expected

Although expectations are for the Fed to maintain current settings, analysts are focusing on any rhetoric over the timing of the next rate hike, which is widely expected to be as soon as March. Market expectations are pricing in over 70% probability of a rate move at the March FOMC meeting.

Traders will also watch out for official comments from the Fed concerning the impact of the recent sell-off in the US dollar. Meanwhile, nonfarm payrolls will also be gleaned for indications of the US economy’s health at the start of 2018, which will affect future policy moves. Flash PMI surveys indicated a mixed but broadly encouraging start to 2018 for the US economy, including another solid employment gain.

Japan consumption indicators

In Japan, updated data for household spending and retail sales will be keenly watched for fresh signs of personal consumption behaviour at the end of last year, especially after the government upgraded its assessment of the Japanese economy, citing stronger growth in private consumption. Recent flash PMI data added to bullish signs on the health of the economy. However, wage growth has remained weak despite a tight labour market, which will likely continue to restrict personal spending.

Download the full report for a full diary of key economic releases.



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