We'll be watching Eurozone industrial figures with caution next week hoping to gain some insight into the length and depth of the economic slowdown. Otherwise, it'll all be about the British PM's update to UK parliament on Brexit progress next Thursday and the backlog of delayed US data releases
The US economy clearly felt a little broader impact from the government shutdown, but the data calendar remains in a state of flux as statisticians work to clear the backlog of their number crunching. We will finally get the December retail sales and durable goods order numbers, but 4Q GDP won't still be released for another couple of weeks.
The numbers should in general be supportive of the Federal Reserve’s decision to indicate a prolonged pause for monetary policy. Lower gasoline prices will drag headline inflation down to just 1.5% YoY, while core inflation should remain in line with the target at 2% YoY. Lower fuel costs will also weight down on the value of retail sales, but excluding this, the story looks good with a strong jobs market and rising pay giving consumers the cash and the confidence to spend. Decent manufacturing surveys suggest industrial production should remain firm, so the Goldilocks scenario of healthy activity with a benign inflation backdrop continues.
We will also be looking for news on trade-related issues, especially the build-up to whether the US determines the car industry is a national security issue. If this is decreed by February 17, this could see tariffs eventually applied to imports, which would heighten fears of escalating protectionism.
A flurry of inflation and fourth quarter growth figures are to be released next week in EMEA and Latam, and the outlook is mixed. Hungary sees headline CPI ticking higher while Poland and the Czech Republic both expect a slowdown in GDP and CPI
We expect GDP in the fourth quarter to slow down from 5.1% to 4.8% year-on-year. The annual 2018 reading, which was published last week, suggests a moderation of both private consumption and investment. Some major revisions to the historical data are likely, given the annual net export contribution was neutral (contrary to the outcome of the quarterly figures published so far).
Inflation should fall further in January from 1.1% YoY to 0.8% YoY due to energy prices, as well as government lowered interim fees, subtracting 0.2 percentage points from the headline index. Core inflation is likely to remain soft – we expect a stable 0.6% YoY reading. The January reading is more uncertain than normal due to increases in local government fees and household maintenance costs (+) and changes to some VAT tax rates (-).
The key question of the week will be whether the forthcoming round of US-China trade negotiations bears out President Trump’s recent positive rhetoric on a trade deal
The Chinese markets will be back from the ‘Golden Week’ Lunar New Year holiday, though players are likely to tread a cautious path, taking cues from the January economic data and progress on the US-China trade talks.
Will the forthcoming round of the US-China trade negotiations bear out President Trump’s recent positive rhetoric on a trade deal?
The delegation led by US Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer will hold trade negotiations with their counterparts in Beijing next week. As in the last high-level meeting in late January (attended by China’s Vice Premier Liu He), we may hear about some more trade concessions from the Chinese side, though the most contentious issue about technology theft and intellectual property rights will continue to linger. Moreover, any major announcements, positive or negative, might well be withheld until after the Trump-Xi meeting in Vietnam at the end of the month.
Meanwhile, China’s January data calendar is shortened as the National Bureau of Statistics holds back the release of some indicators (industrial production, fixed asset investment, retail sales) deemed to be distorted by the timing of the Lunar New Year holiday, which either falls in January or in February. So far, signals have been mixed – the manufacturing economy continues to be weak while services are holding up. We will be watching the trade and monetary data to see the impact of the trade war and for signs of stimulus.
Discover what ING analysts are looking for next week in our global economic calendars