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By Brian Jackson, Econoday Economist
Central bank decisions will be the main focus in the Asia-Pacific region for the week ahead. The Reserve Bank of Australia meets on Tuesday and the Reserve Bank of New Zealand meets on Thursday.
The RBNZ has cut policy rates in each of its last three meetings by a cumulative 125 basis points to 4.25 percent. This policy loosening has been made possible by a steady fall in inflation, with data published last month showing headline inflation at 2.2 percent in the three months to December. Activity indicators, meanwhile, have shown weaker conditions, including an increase in the unemployment rate to 5.1 percent, its highest level since 2020. This has reinforced expectations that officials will cut rates further next week.
The RBA, in contrast, has not yet been in a position to ease policy settings, with its main policy rate having been steady at 4.35 percent since late 2023. Officials remain concerned about the strength of underlying price presses, with recent falls in headline inflation lately reflecting the impact of government energy rebates. Data released last month, however, have also shown underlying measures of inflation falling closer to the target range of 2 percent to 3 percent. Officials now are expected to lower rates by 25 basis points next week, the first cut since late 2020.
Australian employment and New Zealand trade and producer price data are also scheduled for release next week. Monthly Chinese house price data will be published, but other regular monthly Chinese data do not get published in February. That is because officials combine January and February data to account for the impact of the timing of lunar new year holidays. The combined January and February data will be published mid-March.
By Marco Babic, Econoday Economist
As the world awaits what further tariff measures the US imposes on the world, there is as distinct feeling of “Stuck in the Middle with You.” (Apologies to Stealers Wheel).
The week sees the release of trade data for the Eurozone, Italy, and Switzerland for December, too soon to glean any direction from the trade data following the broad tariffs imposed by the United States. Nevertheless, some of the bellwether items to look for in subsequent trade reports will be flows of whiskey and steel. Certainly not obvious bedfellows, but watch the political landscape.
Early indications of sentiment could come from Germany’s ZEW report, a gauge of investor sentiment in Europe’s largest economy, in the middle of the week. Friday sees the release of composite purchasing manager index (PMI) reports for January. Both could provide the first hints of sentiment in Europe on the developments in the US.
France and Italy report final CPI figures for January which, unless subject to unexpected revisions, are unlikely to shed any light on price pressures in Europe.
With tariffs in mind, the focus in coming months will be the entries in trade reports for steel and whiskey. Used cars could also be an interesting entry to keep an eye on. Prices spiked during Covid and could potentially do so again in a regime of steel and aluminum tariffs.
For now, the data is stuck in the middle.
By Tony Mace, Econoday Economist
The week ahead will see a good stream of useful economic indicators but none are quite top-tier. After last week’s dual appearances by Fed Chair Jerome Powell, Fed speakers in the week ahead, including San Francisco Fed President Mary Daly and Chicago Fed President Austan Goolsbee, are likely to elaborate on what Powell already said, which is that the Fed is in no hurry to cut rates. FOMC minutes from January are also on tap. Meanwhile, markets are obliged to pay close attention to whatever President Trump has to say at any moment. As tariffs move ahead the trick will be to figure out where the impact will show up first, with growth or prices?
Scheduled economic reports include monthly housing sector indicators, early readings on manufacturing from the New York and Philadelphia Fed, and the S&P PMI composite flash reports for services and manufacturing. We’ll also get the final readout on consumer sentiment and inflation expectations from the University of Michigan, which jumped into the market’s consciousness after a surprising 5 percent drop in consumer sentiment and a shocking rise in 1-year inflation expectations in the preliminary report for February to 4.3 percent!
The first of the housing reports from the National Association of Home Builders on Tuesday will give markets a sense of home builder sentiment and how they see demand for new housing. The NAHB housing market index ticked up to 47 in January from 46 in December even as mortgage rates broke above 7 percent. Official housing starts and building permits data are due on Wednesday, which provide a bigger-picture view of the housing market. Housing starts bounced up by a surprising 16 percent in December to an annual rate of 1.499 million but were down 3 percent from a year ago. Finally, the existing home sales report from the National Association of Realtors rounds out the week’s housing data on Friday.
In manufacturing, the New York Fed’s Empire index due Tuesday and the Philly Fed report due Thursday are early indicators of business in manufacturing with the Philadelphia report highly correlated with the top-tier ISM purchasing managers report due on March 3. The Empire and Philly Fed numbers and Friday’s S&P PMI composite flash indicators for manufacturing and services will be scrutinized to assess how the business environment is changing in response to the threat of tariffs and other policy uncertainty introduced by the Trump administration.
Canada Housing Starts for January (Mon 0815 EST; Mon 1315 GMT)
Consensus Forecast, Annual Rate: 250,000
Consensus Range, Annual Rate: 250,000 to 270,000
Starts are expected to recover to a 250,000 rate at the start of the year after slipping to 231,468 at an annual rate in December from 267,140 in November.
Australia RBA Announcement (Tue 1430 AET; Tue 0330 GMT; Mon 2230 EST)
Consensus Forecast, Change: -25 bp
Consensus Range, Change: -25 bp to -25 bp
Consensus Forecast, Level: 4.10%
Consensus Range, Level: 4.10% to 4.10%
With inflation down in the fourth quarter, the consensus looks for the RBA finally to kick off its rate cut cycle with a 25 basis point move. Australia’s big banks have already started paring deposit rates in anticipation. The spoiler could be Trump’s tariffs which have undercut the Australian dollar and a rate cut presumably would exacerbate the trend.
United Kingdom Labour Market Report for January (Tue 0700 GMT; Tue 0200 EST)
Consensus Forecast, ILO Unemployment Rate: 4.5%
Consensus Range, ILO Unemployment Rate: 4.4% to 4.5%
Consensus Forecast, Average Earnings - Y/Y: 5.9%
Consensus Range, Average Earnings - Y/Y: 5.9% to 5.9%
The consensus looks for an uptick in unemployment to 4.5 percent as the economy continues to totter. Earnings are expected up to 5.9 percent on year.
Germany ZEW Survey for February (Tue 1100 CET; Tue 1000 GMT; Tue 0500 EST)
Consensus Forecast, Current Conditions: -89.0
Consensus Range, Current Conditions: -89.7 to -88.0
Consensus Forecast, Economic Sentiment: 17.5
Consensus Range, Economic Sentiment: 12.0 to 20.0
Consumer sentiment seems to be recovering a bit in February. Current conditions are expected at minus 89.0 versus minus 90.4 in January and minus 93.1 in December. Economic sentiment is seen up to 17.5 from 10.3 in January, which was down more than expected from 15.7 in December.
Canada CPI for January (Tue 0830 EST; Tue 1330 GMT)
Consensus Forecast, M/M: 0.1%
Consensus Range, M/M: -0.1% to 0.2
Consensus Forecast, Y/Y: 1.8%
Consensus Range, Y/Y: 1.7% to 1.9%
Canada’s inflation continues to hold below the BOC’s 2 percent midrange target. CPI is expected up 0.1 percent on the month and up 1.8 percent from a year ago versus minus 0.4 percent on the month and 1.8 percent on the year last month.
United States Empire State Manufacturing Index for February (Tue 0830 EST; Tue 1330 GMT)
Consensus Forecast, Index: -0.5
Consensus Range, Index: -5.3 to 2.0
The Empire manufacturing index is expected to improve marginally to minus 0.5 in February after dropping to minus 12.6 in January from 2.1 in December.
United States Housing Market index for February (Tue 1000 EST; Tue 1500 GMT)
Consensus Forecast, Index: 47.0
Consensus Range, Index: 45.0 to 48.0
Builder sentiment is seen holding steady with the housing market index at 47 in February after firming to 47 in January from 46 in December.
Japan Merchandise Trade for January (Wed 0850 JST; Tue 2350 GMT; Tue 1850 EST)
Consensus Forecast, Balance: -2,154.1 B
Consensus Range, Balance: -2,481.7 B to -1,981.2 B
Consensus Forecast, Imports - Y/Y: 12.6%
Consensus Range, Imports - Y/Y: 7.9% to 21.3%
Consensus Forecast, Exports - Y/Y: 10.4%
Consensus Range, Exports - Y/Y: 6.8% to 16.7%
Japanese export values are forecast to post a fourth straight year-on-year rise in January, up 10.4%, after hitting a record high ¥9.91 trillion in December with a 2.8% gain. The increase is expected to be led by solid demand for ships, semiconductor-producing equipment and computer chips. Import values are expected to mark their second straight increase, up 12.6%, following a 1.8% rise the previous month and reflecting higher purchases of drugs, smartphones and computers. Both exports and imports will likely show irregular patterns, going into the lunar new year holidays in some Asian countries starting Jan. 29.
The trade balance is forecast to post a large deficit of ¥2,154.1 billion (¥2.15 trillion) after printing its first positive figure in six months. It would compare with a revised ¥132.46 billion surplus in December, a ¥1,766.5 billion (¥1.77 trillion) deficit in January 2024 and the record shortfall of ¥3,506.43 billion (¥3.51 trillion) in January 2023.
Japan Machinery Orders for December (Wed 0850 JST; Tue 2350 GMT; Tue 1850 EST)
Consensus Forecast, M/M: 0.6%
Consensus Range, M/M: -3.3% to 3.0%
Consensus Forecast, Y/Y: 8.0%
Consensus Range, Y/Y: 4.3% to 10.6%
Japanese core machinery orders, the key leading indicator of business investment in equipment, are forecast to edge up 0.6% (range: -3.3% to +3.0%) on the month in December after surging an unexpectedly high 3.5% in November. Capex plans are generally supported by demand for automation amid widespread labor shortages as well as government-led digital transformation and emission control. In the October-December quarter, the core measure is forecast by economists to rise 3.5% on the quarter after falling the previous two quarters (-1.3% in Q3, -01% in Q2), which would be below the official projection of a 5.7% increase.
From a year earlier, core orders, which track the private sector and exclude volatile orders from electric utilities and for ships, are expected to show their seventh gain in 12 months, up 8.0% after jumping 10.3% previously.
New Zealand RBNZ Announcement (Wed 1400 NZDT; Wed 0100 GMT; Tue 2000 EST)
Consensus Forecast, Change: -50 bp
Consensus Range, Change: -50 bp to -50 bp
Consensus Forecast, Level: 4.25%
Consensus Range, Level: 4.25% to 4.25%
With consumer price inflation down and economic activity subdued, the consensus sees the RBNZ making another 50 basis point rate cut in the official cash rate to 3.75 percent after a 50 bp move to 4.25 percent in November. A rate cut would be consistent with the bank’s messaging in November when it said it expected more rate cuts early in the year if conditions continue to evolve as projected, which they have,
United Kingdom CPI for January (Wed 0700 GMT; Wed 1200 EST)
Consensus Forecast, M/M: -0.3%
Consensus Range, M/M: -0.3% to -0.2%
Consensus Forecast, Y/Y: 2.8%
Consensus Range, Y/Y: 2.7% to 2.9%
UK annual inflation is seen at 2.8 percent in January versus 2.5 percent in December. Month on month, the consensus looks for a decline of 0.3 percent after rising by 0.3 percent in December.
United States Housing Starts and Permits for January (Wed 0830 EST; Wed 1330 GMT)
Consensus Forecast, Starts - Annual Rate: 1.397 M
Consensus Range, Starts - Annual Rate: 1.325 M to 1.482 M
Consensus Forecast, Permits - Annual Rate: 1.470 M
Consensus Range, Permits - Annual Rate: 1.440 M to 1.490 M
The call for January is a 1.397 million unit rate, down from 1.499 million in December as the market deals with mortgage rates near 7 percent. Permits are seen at a 1.470 million unit rate in January versus 1.483 million in December.
Australia Labour Force Survey for January (Thu 1130 AET; Thu 0030 GMT; Wed 1930 EST)
Consensus Forecast, Employment - M/M: 20,000
Consensus Range, Employment - M/M: 5,000 to 40,000
Consensus Forecast, Unemployment Rate: 4.1%
Consensus Range, Unemployment Rate: 4.0% to 4.1%
Job growth in Australia in January is expected to show a 20,000 increase on the month. The jobless rate is expected to tick up to 4.1 percent from 4.0 percent in December.
China Loan Prime Rate for February (Thu 0900 CST; Thu 0100 GMT; Wed 2000 EST)
Consensus Forecast, 1-Year Rate - Change: 0 bp
Consensus Range, 1-Year Rate - Change: 0 bp to 0 bp
Consensus Forecast, 1-Year Rate - Level: 3.10%
Consensus Range, 1-Year Rate - Level: 3.10% to 3.10%
Consensus Forecast, 5-Year Rate - Change: 0 bp
Consensus Range, 5-Year Rate - Change: 0 bp to 0 bp
Consensus Forecast, 5-Year Rate - Level: 3.60%
Consensus Range, 5-Year Rate - Level: 3.60% to 3.60%
Forecasters see the policy rate flat at 3.10 percent for the 1-year lending rate and unchanged at 3.60 percent for the 5-year.
Germany PPI for January (Thu 0800 CET; Thu 0700 GMT; Thu 0200 EST)
Consensus Forecast, M/M: 0.5%
Consensus Range, M/M: 0.1% to 0.7%
Consensus Forecast, Y/Y: 1.2%
Consensus Range, Y/Y: 1.0% to 1.3%
The consensus for German producer prices sees an increase of 0.5 percent month on month and an increase of 1.2 percent from a year ago.
United States Jobless Claims for Week 2/15 (Thu 0830 EST; Thu 1330 GMT)
Consensus Forecast, Initial Claims - Level: 215 K
Consensus Range, Initial Claims - Level: 190 K to 220 K
Claims are expected to rise to 215,000 in the latest week after falling by 7,000 to 213,000 a week earlier. The four-week moving average last week was down 1,000 at 216,000.
United States Philadelphia Fed Manufacturing Index for February (Thu 0830 EST; Thu 1330 GMT)
Consensus Forecast, Index: 22.7
Consensus Range, Index: 5.4 to 30.0
Was it dry January? The Philly index caught everyone off guard with an amazing jump to 44.3 in January from minus 10.9 in December. The call for February looks for still-strong growth at 22.7.
Eurozone EC Consumer Confidence Flash for February (Thu 1600 CET; Thu 1500 GMT; Thu 1000 EST)
Consensus Forecast, Index: -14.0
Consensus Range, Index: -15.6 to -13.0
Forecasters see Eurozone consumer sentiment remaining subdued as the consensus for EC consumer confidence sees the index firming to minus 14.0 in February from minus 14.2 in January and minus 14.5 in December.
United States Leading Indicators for January (Thu 1000 EST; Thu 1500 GMT)
Consensus Forecast, M/M: 0.0%
Consensus Range, M/M: -0.2% to 0.1%
Not an inspiring report as forecasters see the leading index flat in January after a 0.1 percent decline in December.
Japan CPI for January (Fri 0830 JST; Thu 2330 GMT; Thu 1830 EST)
Consensus Forecast, Y/Y: 3.9%
Consensus Range, Y/Y: 3.8% to 4.1%
Consensus Forecast, Ex-Fresh Food - Y/Y: 3.1%
Consensus Range, Ex-Fresh Food - Y/Y: 3.1% to 3.2%
Consensus Forecast, Ex-Fresh Food & Energy - Y/Y: 2.5%
Consensus Range, Ex-Fresh Food & Energy - Y/Y: 2.5% to 2.7%
Consumer inflation in Japan is expected to accelerate further in all three key measures in January, with the core reading (excluding fresh food) seen up a 17-month high of 3.1% on year after rising to 3.0% in December from 2.7% in November. Protracted domestic rice shortages boosted the prices for processed food, the weak yen pushed up import costs and the plunge in temperatures triggered strong demand for heat pumps and other appliances. Gasoline prices rose and utility costs remained elevated after the government ended its temporary subsidies late last year.
The year-on-year increase in the total CPI is forecast at a 24-month high of 3.9%, also up from 3.6% the previous month. The underlying inflation measured by the core-core CPI (excluding fresh food and energy) is seen at a 10-month high of 2.5% after being unchanged at 2.4% previously. The Bank of Japan, which expects inflation to be anchored around its 2% target by early 2026, is on course for two more 25 basis point rate hikes (including what seems to be a done deal of +25 basis points later today) that would take the overnight interest rate target to 1% by late 2025 or early 2026 as part of its gradual normalization process after more than a decade of large-scale easing.
United Kingdom Retail Sales for January (Fri 0700 GMT; Fri 0200 EST)
Consensus Forecast, M/M: 0.3%
Consensus Range, M/M: 0.2% to 1.0%
Consensus Forecast, Y/Y: 0.9%
Consensus Range, M/M: 0.5% to 4.0%
Retail sales are expected to post a moderate 0.3 percent rise on the month with a gain of 0.9 percent on year.
Germany PMI Composite Flash for February (Fri 0930 CET; Fri 0830 GMT; Fri 1330 EST)
Consensus Forecast, Manufacturing Index: 45.5
Consensus Range, Manufacturing Index: 44.0 to 51.9
Consensus Forecast, Services Index: 52.5
Consensus Range, Services Index: 50.0 to 53.0
Manufacturing is seen at 45.5 versus 45.0 and services flat at 52.5.
Eurozone PMI Composite Flash for February (Fri 1000 CET; Fri 0900 GMT; Fri 0400 EST)
Consensus Forecast, Composite Index: 50.3
Consensus Range, Composite Index: 46.8 to 50.4
Consensus Forecast, Manufacturing Index: 47.0
Consensus Range, Manufacturing Index: 46.5 to 51.2
Consensus Forecast, Services Index: 51.5
Consensus Range, Services Index: 51.0 to 51.5
The call for PMI composite is 50.3 versus 50.2 in January with manufacturing marginally better at 47.0 from 46.6 and services up to 51.5 from 51.3.
United Kingdom PMI Composite Flash for February (Fri 0930 GMT; Fri 0430 EST)
Consensus Forecast, Manufacturing Index: 48.5
Consensus Range, Manufacturing Index: 48.0 to 48.5
Consensus Forecast, Services Index: 51.0
Consensus Range, Services Index: 50.5 to 51.0
Manufacturing is expected up to 48.5 from 48.3 and services up to 51.0 from 50.8.
Canada Retail Sales for December (Fri 0830 EST; Fri 1330 GMT)
Consensus Forecast, M/M: 1.6%
Consensus Range, M/M: 1.5% to 1.6%
Forecasters agree with Stats Canada’s preliminary forecast calling for a strong 1.6 percent rise in sales on the month in December after no change in November.
United States PMI Composite Flash for February (Fri 0945 EST; Fri 1445 GMT)
Consensus Forecast, Manufacturing Index: 51.3
Consensus Range, Manufacturing Index: 50.5 to 52.0
Consensus Forecast, Services Index: 53.0
Consensus Range, Services Index: 52.7 to 54.5
Forecasters see manufacturing rising to 51.3 in February flash from 51.2 with services similarly edging up to 53.0 from 52.9.
United States Existing Home Sales for January (Fri 1000 EST; Fri 1500 GMT)
Consensus Forecast, Annual Rate: 4.16 M
Consensus Range, Annual Rate: 4.02 M to 4.29 M
Sales are seen down a bit at an annual rate of 4.16 million units in January after rising more than expected to 4.24 million in December from 4.150 million in November.
United States Consumer Sentiment for February (Fri 1000 EST; Fri 1500 GMT)
Consensus Forecast, Index: 68.0
Consensus Range, Index: 67.8 to 70.1
Sentiment dropped a lot more than expected to 67.8 in the preliminary reading for February from 71.1 in January as inflation fears materialized in response to the threat of tariffs. The final reading for February is not expected to change much at 68.0.
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