UNDERLYING US inflation probably rose in January by the most in a year, as tracked by the Federal Reserve’s (Fed) preferred metric, highlighting the long and bumpy path to taming price pressures.
The core personal consumption expenditures (PCE) price index, which excludes food and energy costs, is seen rising 0.4% from a month earlier.
That would mark the second straight monthly acceleration in a gauge that’s largely been receding over the past two years.
And when annualising the data on a three or six-month basis, both would rebound above 2% after dipping below the Fed’s target in December.
Fed officials have stressed they’re in no rush to lower borrowing costs and will only do so once they’re confident that inflation is retreating on a sustained basis.
The PCE data, due Thursday, will likely validate that stance and possibly further diminish market expectations for an interest-rate cut in the coming months.
Also due are the US government’s second estimate of fourth-quarter growth, durable goods orders, and the Institute of Supply Management’s manufacturing gauge for February.
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January figures for new and pending-home sales will give the latest readout on the housing market, while the Conference Board and the University of Michigan will release separate measures of consumer sentiment.
“The stage is set for monthly PCE inflation to jump following hot consumer price index (CPI) and producer price index (PPI) reports. While that certainly won’t put the Fed at ease, we think policymakers will largely look through the January increase.
“Temporary factors – including residual seasonality and the increase in prices of portfolio-management services – serve as critical drivers behind the January increase.
“Similarly, some of the expected gain in personal income comes from cost-of-living adjustments and an unsustainably high nonfarm-payroll print,” said economists at Bloomberg Economics Anna Wong, Stuart Paul, Eliza Winger and Estelle Ou.
Looking north, Canada will publish its growth data for the fourth quarter, for which preliminary numbers last month pointed to a rebound.
Elsewhere, crucial inflation reports from the eurozone, Japan and Australia will also keep investors busy, while Group of 20 finance ministers and central bankers are set to meet in Sao Paulo from Wednesday.
Below is our wrap of what’s coming up in the global economy.
> Asia: Central banks in Australia and Japan will get fresh inflation data that may either spur or diminish policy pivot bets in different directions.
Australia’s CPI is seen inching up to 3.5% year-on-year for January, a pace that would still be slow enough to sustain speculation over a rate cut by the Reserve Bank.
Japan’s January consumer inflation excluding fresh food may slow to 1.8%, dipping below the Bank of Japan’s 2% target for the first time since March 2022, but don’t be fooled: base effects are expected to trigger a resurgence in February, keeping the bank on track to end the negative rate in a month or two.
The Reserve Bank of New Zealand is expected to hold its official cash rate at 5.5% on Wednesday as inflationary pressure eases.
Among other statistics, India’s gross domestic product growth is seen slowing to 6.7% in the fourth quarter from a year earlier, while Taiwan’s economy probably expanded by about 5.1%.
On Thursday, Australian retail sales and capex may rebound a tad, while trade figures are due in Thailand.
The week closes with South Korean exports, which will have been skewed by the Lunar New Year holidays.
The same goes for China’s purchasing manager’s index. Official data are forecast to show a slight improvement in factory activity, while the Caixin manufacturing gauge may hold mostly steady. The big question is will authorities adopt measures to support stocks, or wait until the NPC the following week?
> Europe, Middle East, Africa: Inflation in the eurozone will be a highlight in what’s going to be a big week for gauging the strength of global price growth.
Friday’s report will land along with Italy’s at the end of a 24-hour flurry of releases from around the region, with France, Spain and Germany all scheduled to publish national gauges on Thursday.
Economists anticipate the overall eurozone outcome at 2.5%, marking some – but not enough – progress toward the 2% goal. Similarly, the underlying measure that strips out volatile elements such as energy is expected to weaken to 2.9%.
Those numbers will be pored over by European Central Bank officials before their March 7 meeting. They’ll enter a blackout period on Thursday in advance of that decision.
Elsewhere in Europe, gross domestic product (GDP) reports in Switzerland, Sweden and the Czech Republic may draw attention. The UK has a quieter week, with mortgage numbers among the highlights. — Bloomberg
Molly Smith and Craig Stirling write for Bloomberg. The views expressed here are the writers’ own.