The US economy is maintaining a strong trajectory, exceeding expectations in the final quarter of 2024. Economists predict that the government’s initial estimate for fourth-quarter gross domestic product (GDP) will reveal an annualized growth rate of 2.7%, following two consecutive quarters of approximately 3% growth. This robust performance underscores the US economy’s resilience and its ability to outperform its global counterparts.
This positive economic news comes on the heels of the Federal Reserve’s first policy meeting of 2025. Despite healthy demand and persistent inflation, officials are widely anticipated to maintain borrowing costs steady. Their December meeting signaled that only two interest rate cuts are projected for the entire year.
Driving this growth is robust consumer spending, fueled by a strong labor market.Personal consumption of goods and services is projected to exceed a 3% annualized pace for the second consecutive quarter. “The US continues to outperform advanced economies in Europe and around the world” due in part to this strength, according to experts.
The picture looks markedly different across the Atlantic. Economists predict stagnation in France‘s economy in the final months of 2024, along with a slight contraction in Germany. Data for the broader eurozone,also slated for release Thursday,is expected to reveal minimal growth,continuing a pattern of sluggish performance observed over several years.
Looking ahead, monthly US household spending figures, scheduled for release Friday, are anticipated to signal continued momentum heading into 2025. Economists also expect the personal income and spending report to show a slight increase in the Federal Reserve’s preferred inflation gauge compared to the previous month.
The Bank of Canada, meanwhile, is expected to reduce rates by 25 basis points on Wednesday, marking a slowdown from consecutive 50 basis-point cuts. This decision comes amidst uncertainty stemming from US President Donald Trump’s tariff threats.
Upcoming economic events include GDP data for November and a flash estimate for December, providing insights into the impact of the US election and Canadian Prime Minister Justin Trudeau’s sales tax holiday. Additionally,rate cuts in the eurozone and Sweden,along with a 100 basis-point hike in Brazil,are anticipated. Several reports from Japan and a key speech by the UK chancellor are also slated for release,keeping investors engaged.
Asia and Europe: Economic Data in Focus This Week
Table of Contents
- 1. Asia and Europe: Economic Data in Focus This Week
- 2. Global Central Banks on High Alert as Inflation Spikes
- 3. Europe Holds Its Breath
- 4. Africa Navigates Data Shifts and Rate Decisions
- 5. Latin america: A Balancing Act for Central Banks
- 6. Given the increasing risk of stagflation,what specific policy measures could governments implement to mitigate its negative impacts?
- 7. The Future of Finance: A Dialog on Global Economic Challenges
- 8. Interview with Dr. Emilia Cortez, Chief Economist at Global Insights & Analysis
The upcoming week promises a flurry of economic data releases from across Asia and Europe, setting the stage for crucial market insights.
Asia will kick off the week with a focus on China’s economic performance. On Monday, investors will scrutinize January manufacturing data and December industrial profits, which are predicted to continue declining. meanwhile, Japan, following its recent Bank of Japan decision to raise interest rates to the highest level in 17 years, will be under the spotlight with a series of economic indicators.
Tuesday will see the release of December producer prices among service firms, expected to show another increase. This will be followed by consumer confidence data on Wednesday. The rest of the week brings further insights into the Japanese economy, including the december jobless rate, January Tokyo consumer prices, December retail sales, December housing starts, and preliminary December industrial production figures.
Moving on to other asian economies, Australia will release key indicators including December consumer prices, fourth-quarter import and export prices, and producer prices for the final three months of 2024. New Zealand will be in focus with trade data and consumer and business confidence reports on Thursday and Friday.The Philippines is expected to announce on Thursday that its GDP expanded at a faster pace in the fourth quarter compared to the previous three months. Lastly, Thailand will wrap up the week on Friday with trade and manufacturing production figures.
Across the region, Pakistan’s central bank is anticipated to cut interest rates on Monday, while Sri Lanka officials will announce their policy rate on Wednesday.
Turning to Europe, the week’s most closely-watched event will be the European Central Bank’s decision on Thursday, where a 25 basis-point rate cut is widely expected.
“With policymakers apprehensive about Trump’s possible tariffs and relatively sanguine about inflation risks, further reductions are likely,” experts predict.
Market participants will be eagerly listening to President Christine Lagarde’s comments after the declaration for clues on the future path of monetary policy.
Germany’s influential Ifo business sentiment report, due Monday, will provide insights into the health of the German economy. Fourth-quarter GDP data, due shortly before the ECB decision, could reveal that a contraction in Germany, stagnation in France, and only meager growth in Italy held back the broader Eurozone, which is projected to have expanded by a mere 0.1%. Inflation data from Spain,Germany,and France,all due Friday,will also be closely watched.
Global Central Banks on High Alert as Inflation Spikes
The global economic landscape is in a state of flux,with central banks navigating a precarious path amidst soaring inflation and mounting market uncertainty.
This week promises to be especially pivotal with a series of key monetary policy decisions set to reverberate across continents.
Europe Holds Its Breath
In Europe, the Bank of England Governor Andrew Bailey and his team will answer tough questions from lawmakers regarding financial stability on Wednesday, a day after Chancellor Rachel Reeves offers her vision for bolstering economic growth. This comes after a turbulent start to the year for UK financial markets, compounded by a barrage of unsettling economic news.
Meanwhile, a important shift is brewing in the Hungarian economic policy landscape. While Hungary’s National Bank is widely anticipated to maintain its benchmark interest rate at a regional high of 6.5% due to a recent surge in consumer prices, Sweden’s Riksbank could be taking a different route. Market whispers suggest a potential quarter-point reduction in interest rates, mirroring the Riksbank’s ongoing easing campaign aimed at curbing inflation, which has slowed down more rapidly than anticipated.
Africa is observing its own economic shifts. South Africa and Nigeria are set to unveil a thorough revamp of their inflation data, adopting 2024 as the reference year and recalibrating certain indices. Nigeria will concomitantly rebase its GDP figures.
In Ghana, the central bank is expected to keep interest rates steady in an effort to tame inflation, which averaged a formidable 23% last year. While the central bank targets inflation to stabilize within a 6% to 10% range by the fourth quarter, they are walking a tightrope to prevent an economic slowdown.
South Africa,facing similar inflationary pressures,is also considering a quarter-point reduction in borrowing costs,marking their third consecutive easing move.Their target: to bring interest rates down to 7.5%. Officials remain optimistic that inflation will remain below their 4.5% midpoint target until at least mid-2025.
Latin america: A Balancing Act for Central Banks
The Latin American region, meanwhile, showcases a diverse array of economic challenges. Chile’s central bank will convene its policy meeting amidst a slowing economy. Even though headline inflation has taken an unexpected turn upwards, analysts believe longstanding market expectations will lead to a hold on interest rates at 5%.
“Deteriorating inflation expectations as then may give policymakers reason to pause. ”
This sentiment rings especially true for Colombia’s central bank heading into its 10th consecutive interest rate cut.
In Brazil, all eyes will be on Banco Central do Brasil’s inaugural monetary policy meeting of the year. Unwavering in its commitment to curb inflation, which is persistently exceeding the 3% target, the central bank aims for another substantial 100 basis-point hike, pushing interest rates to 13.25%.
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Given the increasing risk of stagflation,what specific policy measures could governments implement to mitigate its negative impacts?
The Future of Finance: A Dialog on Global Economic Challenges
Interview with Dr. Emilia Cortez, Chief Economist at Global Insights & Analysis
Dr. Cortez delves into the current state of the global economy, highlighting key challenges and exploring potential solutions.
Q: Dr. Cortez, the global economic landscape seems more volatile than ever. What are the biggest factors contributing to this uncertainty?
A: indeed, the world economy faces a confluence of unprecedented challenges. The lingering effects of the pandemic, coupled with geopolitical tensions and soaring inflation, are creating a perfect storm. Supply chains remain disrupted, energy prices are volatile, and central banks are walking a tightrope as they attempt to tame inflation without triggering a recession.
Q: What are some of the most concerning trends you see emerging?
A: One notably worrisome trend is the growing risk of stagflation,a combination of slow economic growth and high inflation. This scenario is historically difficult to manage, as traditional policy tools may prove ineffective. We’re also seeing increasing divergence in economic performance across regions, creating further instability.
Q: Many experts believe that traditional monetary policy tools are becoming less effective. What alternatives are on the horizon?
A: That’s right. Central banks are facing a dilemma, as aggressive interest rate hikes could stifle growth while doing little to address supply-side pressures. Exploring innovative solutions, like fiscal support targeted at vulnerable populations and targeted interventions to address supply chain bottlenecks, might potentially be necessary.
Q: What advice would you give to individuals and businesses navigating this turbulent economic surroundings?
A: It’s critically important to remain adaptable and resilient. Individuals should prioritize saving and reduce unnecessary expenses, while businesses should focus on diversifying their supply chains, enhancing operational efficiency, and investing in innovation. Collaboration and global cooperation will also be crucial in addressing these complex challenges.
