Did US consumer price growth slow again in December?

Investors and economists are betting that the Fed’s aggressive monetary campaign will cause consumer price growth to slow again in December.

On Thursday, the Bureau of Labor Statistics will release consumer price index data for the previous month. Market participants surveyed by Refinitiv expected prices to have risen 6.6 percent year-on-year in December, down from a 7.1 percent increase in November. This marks the slowest pace since October 2021. Consumer prices are expected to remain flat on a monthly basis compared to an increase of 0.1 percent in November.

John Hill, a strategist at Barclays, said the decline is expected to be partly driven by lower energy prices, which included gasoline, which fell 13 percent in December.

The core CPI, which excludes the volatile food and energy components, is expected to rise 5.7 percent year-on-year, up from 6 percent in November.

These moves will come at the end of the year in which the Federal Reserve raised interest rates from near zero to a range of 4.25 to 4.5 percent. The effects of the historical pace of increases have been rather sluggish: inflation peaked in June, but continued to rise above 8 percent through September.

December inflation data will be an important piece of information for the Fed’s two-day meeting starting on January 31 and could help determine whether the central bank raises interest rates by 0.5 percentage point, matching last month’s increase, or slowing the pace of increases further. . Kate Duguid

What will the industrial production data reveal about the manufacturing sector in Europe?

The past year was difficult for many European manufacturers and conditions are unlikely to improve much in November, when industrial production was expected to suffer its second consecutive monthly decline.

The energy crisis triggered by Russia’s invasion of Ukraine, combined with continued disruption to global supply chains and weak economic growth, has made 2022 a difficult year for many industrial clusters in Europe.

Economists polled by Reuters expect industrial production in the euro zone to have fallen 0.2 percent when those figures are released on Friday. Earlier in the week, national figures for Germany, France and Italy — the bloc’s three largest economies — were also expected to reveal slight contractions in industrial production.

The gloomy outlook for the German industrial sector was underlined last week, when factory orders data for November revealed a much larger-than-expected decline of 5.3 percent from the previous month.

However, economists believe that it will take some time before a sharp drop in demand affects production due to the large backlog of orders since the outbreak of the coronavirus pandemic in 2020. Underlining this, sales volumes in German manufacturing remained high in November, rising 2.1 per cent.

“Weak demand is likely to have a weak effect on production,” said Ralf Solven, an economist at Germany’s Commerzbank. “After all, most industrial companies have a large number of orders backlog, which they can now solve.” Martin Arnold

Did the British economy shrink more?

The British economy is expected to continue to struggle at the end of last year under the pressure of high inflation and rising borrowing costs.

Economists polled by Reuters expected the UK’s gross domestic product to have fallen 0.3 percent between October and November, when the data is released on Friday.

Sandra Horsfield, an economist at Investec, noted that the British economy has been on a downward trend since May 2022, when inflation began to rise. The government provided aid to households and businesses facing a cost-of-living crisis, which may have boosted the economy in November.

A reversal of the National Insurance hike that took effect in April 2022 from November onward, which left after-tax paychecks somewhat higher than they were in October, should also support consumers’ ability to spend. Moreover, power generation appears to have rebounded somewhat after weakness in October, as higher-than-normal wind speeds should have fueled industrial production.

But Horsfield said these factors and other government aid absorbed only part of the blow.

Add to that the constraining effect on higher interest rate activity, and the likelihood is that GDP will trend lower for some time – particularly as it spreads [industrial] “The strikes cause some additional disruption,” Horsfield said.

The economy contracted in the third quarter of 2022 and the November data will provide more information about the final quarter. Many economists expect the UK to have already entered a recession that will last for most of 2023.

“The bright side of this particular cloud is that we expect it to help dampen price pressures,” Horsfield said. Valentina Romy