Key events in developed markets, EMEA and Asia next week

The eurozone starts off the year with some key data releases. Energy inflation is set to trend lower on the back of base effects and declining oil prices. That makes a small drop below 10% quite possible but beware of developments outside of energy. The Economic Sentiment Survey, meanwhile, will give some insight into price expectations from businesses. It will also give a sense of how businesses have fared through the final month of the fourth quarter when we expect a contraction.

We expect December inflation to be at 2.9% MoM, leading to a further decline in the annual figure, to 67% from 84.4% a month ago. Easing global commodity prices and strength in the currency will likely be supportive factors in the monthly reading, and along with favourable base effects, this will contribute to annual CPI continuing its downward trend in the near term, depending on the continuation of currency stability.

In Hungary, the New Year starts with some strong labour market data. Strong wage growth might come from the one-off, mid-year wage adjustment, which is reflected in inflation readings. The unemployment rate will show some short-term stability heading into year-end. But the real deal will be the retail sector performance in November, where we expect a negative reading, showing the impact of negative real wage growth and the changing propensity to consume.