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ECB, BoC, BoJ meetings and January flash PMI releases

Central bank meetings in the eurozone, Canada and Japan will be the highlights through the week as the market looks for hints of monetary policy changes. The first set of flash PMI surveys for 2024 will also be released on Wednesday, providing insights into economic conditions across major developed economies. Additional economic data will be in abundance, including the release of US Q4 GDP, core PCE figures and various inflation updates across the globe. US earnings will also add to a busy week for the markets.

The ECB and BoC meetings will be economic events to watch closely after market optimism about lower rates has started to waver into the new year. The stalling of market enthusiasm was not unexpected, with the January S&P Global Investment Manager Index having previously signalled reduced risk appetite and lower expected returns in the near term. Importantly, the market still sees central bank policy as a positive market driver, tied to the lowering of interest rates, and any dovish rhetoric coming through from policymakers at major central banks may again fuel hopes for more supportive financial conditions for equity returns.

The question of course is when rates will start to be lowered, and by how much. Insights into these questions will be provided by the first set of flash PMI releases for 2024. The flash PMI figures are set to provide the earliest indications for growth and price trends in the new year (see box), with rising inflationary pressures in certain regions over December 2023 posing challenges for some of the most optimistic forecasts for rate cuts. Additionally, recent 'good news is bad news' reaction towards US economic releases, such as the stronger-than-expected retail sales figures (see page 3), may also mean that any upside surprises in flash PMI readings out of the US may not be taken in a positive manner. However, with looser financial conditions having helped to boost US growth in December 2023, the bias seems to be for more positive readings in the coming months.

Finally, the Japanese equity market continued to trend in line with it being the most favoured market according to IMI respondents. That said, the Nikkei 225 has started to diverge from the PMI output index, with which it has a strong correlation, reinforcing concerns that the market is becoming heated. A sense check of Japan's growth conditions will therefore be anticipated with the flash PMI.

Flash PMI updates in focus

Flash PMIs will provide fresh insights into growth and inflation trends at the start of 2024, and the extent to which regional divergences are persisting.

December saw the Global PMI rise to 51.0, its highest since last July. However, this is clearly not an economy firing on all cylinders. Despite the rise, the PMI remains below the survey's long-run average of 53.2, pointing to much reduced global growth momentum compared to earlier in the year.

Manufacturing output dropped for a seventh month in December and service sector growth remained well below that seen earlier in the year due in part to waning demand for travel and tourism.

A further downturn in the Eurozone, which saw output fall for a seventh month running in December, likely means the region is in recession. In contrast, a sustained - albeit modest - expansion continued to be reported in the US, where output rose for an eleventh month. An acceleration of output growth in the UK meanwhile helped allay recession worries, and Japan's output stabilised after contracting in November.

Inflation pressures, as measured by selling prices for goods and services, meanwhile continued to run well below levels of a year ago, but lifted higher in the eurozone, UK and Japan, and showed signs of stubbornness in the US. Official inflation data have since also edged higher.

The January PMI data could therefore provide important insights into macroeconomic developments at a time of heightened speculation about the timing of future rate cuts.

Key diary events

Monday 22 Jan
China (Mainland) Loan Prime Rate (Jan)
Malaysia Inflation (Dec)
Taiwan Export Orders (Dec)
Hong Kong SAR Inflation (Dec)
United States CB Leading Index (Dec)

Tuesday 23 Jan
South Korea PPI (Dec)
Australia NAB Business Confidence (Dec)
Japan BoJ Interest Rate Decision
Japan BoJ Quarterly Outlook Report
Singapore CPI (Dec)
Taiwan Industrial Production (Dec)
Eurozone Consumer Confidence (Jan, flash)

Wednesday 24 Jan
Australia Judo Bank Flash PMI, Manufacturing & Services*
Japan au Jibun Bank Flash Manufacturing PMI*
UK S&P Global/CIPS Flash PMI, Manufacturing & Services*
Germany HCOB Flash PMI, Manufacturing & Services*
France HCOB Flash PMI, Manufacturing & Services*
Eurozone HCOB Flash PMI, Manufacturing & Services*
US S&P Global Flash PMI, Manufacturing & Services*
New Zealand Inflation (Q4)
Japan Trade (Dec)
Thailand Trade (Dec)
Malaysia BNM Interest Rate Decision
South Africa Inflation (Dec)
Canada BoC Interest Rate Decision

Thursday 25 Jan
South Korea GDP (Q4, adv)
Australia RBA Bulletin
Hong Kong SAR Trade (Dec)
Germany Ifo Business Climate (Jan)
Norway Norges Bank Interest Rate Decision
South Africa PPI (Dec)
Turkey TCMB Interest Rate Decision
Eurozone ECB Interest Rate Decision
United States Durable Goods Orders (Dec)
United States GDP (Q4, adv)
United States Wholesale Inventories (Dec)
United States New Home Sales (Dec)

Friday 26 Jan
Australia, India Market Holidays
Japan BoJ Meeting Minutes (Dec)
United Kingdom Gfk Consumer Confidence (Jan)
Germany Gfk Consumer Confidence (Feb)
United States Core PCE Price Index (Dec)
United States Personal Income and Spending (Dec)
United States Pending Home Sales (Dec)

What to watch in the coming week

Flash PMI for January

January flash PMI data will be released for major developed economies including the US, UK, Eurozone, Japan and Australia on Wednesday. Latest global PMI data revealed that the global economic expansion accelerated in December, though masking the widening of divergences by region and sectors. Additionally, as major central banks including the Fed and ECB are set to lower interest rates in 2024 with inflation lowering, recent PMI prices data showed the descent stalling, highlighting the "last mile" challenge for policymakers.

Americas: BoC meeting, US Q4 GDP, core PCE data

The Bank of Canada (BoC) convenes on Wednesday, January 24, with monetary policy pivots not expected until mid-2024. That said, central bankers' views, especially towards inflation, will be scrutinised for hints of when rate cuts may begin. The latest official CPI data out of Canada showed inflationary pressures easing in line with the trend hinted by PMI data, though remaining above the central bank's target, thus proving no rush for the BoC to move.

In the US, a series of economic releases will be updated in the week including the fourth quarter GDP reading. Consensus expectations point to slower growth in the fourth quarter of 2023, down from the 4.9% quarter-on-quarter (q/q) figure in Q3. Other noteworthy data releases include core PCE, personal income and spending and home sales data.

EMEA: ECB meeting, German Ifo and GfK data

Besides flash PMI data, the key highlight out of the eurozone in the coming week will be the European Central Bank (ECB) meeting on Thursday. When the ECB is likely to start lowering interest rates remains an ongoing debate for the market. While a Bloomberg consensus pointed to four 25 basis points (bps) cuts starting June, as inflation and economic conditions moderates, signs of the inflation descent stalling for the eurozone have started to show via PMI prices data, hinting at uncertainties in the path ahead.

APAC: BoJ, BNM meetings, Japan trade data, Singapore, Malaysia inflation

In APAC, the Bank of Japan meeting unfolds on Tuesday with the minutes from the December meeting, where a continuation stance was communicated, also due at the end of the week. Although no changes are expected in the upcoming monetary policy meeting, the consensus expectation points to the BoJ exiting current accommodative monetary policy settings as early as April. Latest PMI data, with its leading-indicator properties for inflation, have pointed to moderating inflationary pressures for Japan in the coming months, potentially even past the 2% level, thereby creating some uncertainties on the pace of exit.

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Purchasing Managers' Index™ (PMI^®) data are compiled by S&P Global 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.

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