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Fed, BoE meetings, US payrolls, eurozone GDP and global PMIs

Central bank meetings remain in the spotlight with the US Fed and the Bank of England both set to convene in the coming week. At the same time, several key data releases are expected including the US labour market report plus euro area GDP and CPI data. While the US data are expected to support signs of a soft landing, the eurozone looks set to have fallen into recession. Worldwide manufacturing PMI will also be due for detailed insights into conditions in the goods producing sector, especially in terms of shipping delays.

The first Federal Open Market Committee (FOMC) meeting of the year will be eagerly awaited for clues as to when the Fed will pivot. At the time of writing, market pricing for chances of a March rate has fallen below 50%, but signs of solid fourth quarter growth and lower inflation have appeared. This has encouraged sentiment around a soft landing for the US economy, and should allow rates to move lower in the first half of 2024. Non-farm payroll numbers, plus wage and unemployment data, will provide fresh insights into the economy's health and feed further rate speculation.

In contrast to the rosy-looking US economic performance, GDP data are set to show the eurozone having fallen into a mild technical recession late last year, with the downturn looking particularly concerning in Germany. Policymakers at the ECB have nevertheless been "encouraged" by signs of the downturn bottoming out from the January flash PMI, with inflation also cooling in line with expectations. But whether the ECB has scope to rate cuts in the first half of the year remains highly debated.

Besides the Fed, the Bank of England, likewise convenes in the coming week, but faces greater challenges. While early PMI data showed surprising strength in growth, the survey also pointed to worryingly stubborn price pressures, hinting at reduced scope for any near-term loosening of policy. Rhetoric coming through from the BoE will therefore be keenly watched, especially with the Red Sea disruptions amounting to considerable risks for inflation.

Red Sea delays add to manufacturing woes

January's flash PMI data showed manufacturers reporting growing issues with supply chains amid intensifying disruptions to shipping in the Red Sea. Across the four largest developed economies, the US, Eurozone, Japan and the UK, average supplier delivery times lengthened in January for the first time in a year.

Some countries were more affected than others. The UK was worst hit, with lead times lengthening to a degree not seen since the pandemic-related supply issues of September 2022. But longer deliveries were also reported in the US and the eurozone for the first times in a year, and Japan's delivery delays hit a ten-month high.

The delays come at a time where attacks by Houthi rebels have led increasing numbers of shipping companies to transport goods from Asia to Europe via the Cape of Good Hope rather than the Suez Canal. This extended journey typically lengthens the delivery route by at least 10 days. Delays in January were most widely reported for textiles and vehicle manufacturing.

Following the adage that "time is money", the lengthening of supplier lead times was accompanied by a rise in manufacturers' input costs across the G4 for the first time in nine months. Although only modest, January's input price rise was the largest since April of last year and could concern policymakers if the disruptions persist in the coming months and fuel further price rises. The UK saw a particularly marked rise in prices.

Full global manufacturing PMI data published in the coming week will therefore be eyed for more insights into the impact of the shipping delays.

Key diary events

Monday 29 Jan
New Zealand Trade (Dec)
Singapore MAS Monetary Policy Statement

Tuesday 30 Jan
Japan Unemployment Rate (Dec)
France GDP (Q4, prelim)
Spain GDP (Q4, flash)
Italy GDP (Q4, advance)
United Kingdom Mortgage Lending and Approvals (Dec)
Eurozone GDP (Q4, flash)
Eurozone Economic Sentiment (Jan)
Mexico GDP (Q4, prelim)
United States S&P/Case-Shiller Home Prices (Nov)
United States JOLTs Job Opening (Dec)
United States CB Consumer Confidence (Jan)

Wednesday 31 Jan
South Korea Industrial Production (Dec)
Japan BoJ Summary of Opinions (Jan)
Australia CPI (Q4)
China (Mainland) NBS PMI (Jan)
Philippines GDP (Q4)
Japan Consumer Confidence (Jan)
Germany Retail Sales (Dec)
United Kingdom Nationwide House Prices (Jan)
France Inflation (Jan, prelim)
Taiwan GDP (Q4, advance)
Hong Kong SAR GDP (Q4, advance)
Germany Unemployment Rate (Jan)
Germany GDP (Q4, flash)
Germany Inflation (Jan, prelim)
United States ADP Employment Change (Jan)
Canada GDP (Dec, prelim)
United States Fed FOMC Interest Rate Decision
Brazil BCB Interest Rate Decision

Thursday 1 Feb
Worldwide Manufacturing PMIs, incl. global PMI* (Jan)
South Korea Trade (Jan)
Australia Building Permits (Dec, prelim)
Indonesia Inflation (Jan)
Eurozone Inflation (Jan, flash)
Eurozone Unemployment Rate (Dec)
Italy Inflation (Jan, prelim)
United Kingdom BoE Interest Rate Decision
United States ISM Manufacturing PMI (Jan)

Friday 2 Feb
South Korea Inflation (Jan)
Australia Home Loans (Dec)
France Industrial Production (Dec)
United States Non-farm Payrolls, Average Hourly Earnings, Unemployment Rate (Jan)
United States UoM Sentiment (Jan, final)
United States Factory Orders (Dec)

* Access press releases of indices produced by S&P Global and relevant sponsors here.

What to watch in the coming week

Worldwide manufacturing PMI for January

Following the flash PMI release, including the inaugural HSBC Flash India PMI, which saw India's private sector economy grow at a strong pace at the start of 2024, worldwide manufacturing PMI will be due on Thursday to provide a comprehensive view into conditions across the global goods producing sector. Particular focus will rest on the impact of Red Sea shipping disruptions to manufacturing supply chains and prices (see box on page 1).

Americas: Fed FOMC meeting, US payrolls

While no changes in rates are expected at the first Federal Open Market Committee (FOMC) meeting of the year, taking place over January 30-31, hints of when a rate cut will occur will be closely watched. This is particularly with January's S&P Global Flash US PMI data indicating further cooling of inflationary pressures to below the Fed's 2% target and PCE data showing moderating inflation in the fourth quarter, despite a 3.3% GDP growth rate.

January's labour market report will also be released next week. Consensus expectations currently point to lower, but still substantial new payroll additions at the start of the year, and wage growth is meanwhile expected to slow from December, adding to recent welcome signs of a 'soft landing' for the US economy.

EMEA: BoE meeting, Euro area GDP, inflation

The Bank of England convenes in the week with no immediate changes to monetary policy expected. Analysts have pencilled in cuts from around mid-2024 according to a Reuters poll. Latest S&P Global Flash UK PMI outlined better-than-expected growth for the UK economy and stubborn price pressures at the start of 2024, which may deter the BoE from cutting interest rates as quickly as many expect. This is especially with supply disruptions in the Red Sea igniting inflation in the manufacturing sector.

Fourth quarter GDP figures will also be due for the eurozone, including details for France, Germany, Italy and Spain. A 0.1% contraction is widely expected for the eurozone, meaning the region will have fallen into a technical recession, led by a steep 0.3% decline in Germany. More up-to-date HCOB Flash PMI data have so far showed the Eurozone downturn prolonging into the new year. Prices have started rising at a faster rate in January, preluding a still-elevated path for CPI. Eurozone inflation data are due Thursday alongside the manufacturing PMIs.

APAC: GDP updates, Australia CPI, Japan industrial production

Fourth quarter GDP updates are awaited for Hong Kong SAR, Taiwan and the Philippines, plus Australia's CPI reading will be due midweek with the consensus pointing to a lower reading compared to the 5.4% headline number.

Inflation figures will also be due from economies including Indonesia and South Korea, while Japan releases industrial production data.

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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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