Expected week: China’s industrial production, retail sales, GDP and Bank of Japan interest rate decision

A range of economic data is expected for the week of January 16 – including China’s industrial production and gross domestic product, as well as the Bank of Japan’s interest rate decision.

On Monday South Korea is to release revised trade data and Indonesia is to release its December trade balance. India is due to release its wholesale price index, which economists polled by Reuters expect will fall to 5.6% in December.

China is due to release December retail sales, industrial production, urban fixed investment for December and its gross domestic product for the quarter on Tuesday. Singapore will release its December non-oil exports on the same day.

On Wednesday, the Bank of Japan will conclude its monetary policy meeting and is expected to keep its ultra-low interest rates. Investors will be looking for clues as to who Governor Haruhiko Kuroda’s successor might be and a potential policy shift.

Japan is expected to release November machinery orders on the same day, while Malaysia releases December trade data.

On Thursday, Malaysia’s central bank will announce interest rates, while Australia releases its employment data.

China is expected to release its interest rates for one- and five-year loans on Friday. Japan’s consumer price index for December is also expected.

– Jihye Lee

Inflation prospects are weakening again, traders are fully pricing in a quarter-point rate hike

Falling consumer inflation expectations come with expectations that the US Federal Reserve is likely to scale back rate hikes in a few weeks and soon end them altogether.

The University of Michigan consumer survey on Friday showed the inflation outlook for a year fell to 4%, the third straight monthly decline and the lowest since April 2021.

At the same time, traders put a 94.2% chance of a 0.25 percentage point rate hike on Feb. 1 when the next two-day Fed meeting ends. This is another smaller move from December’s 0.5 percentage point hike, which was itself a deceleration from four consecutive 0.75 percentage point gains.

“Inflation expectations are well anchored and improving as price pressures ease in many sectors. The Fed is likely to hike 0.25% at the upcoming meeting later this month,” said Jeffrey Roach, LPL Financial’s chief economist. “We shouldn’t be surprised if the Fed starts talking about a pause in the near future.”

– Jeff Cox

How will the Fed react to falling inflation and recession warnings from bank CEOs?

A negative inflation reading on Thursday, coupled with warnings of a mild recession from major banks on Friday, could be signs the Fed may pause or even cut rates soon this year, but that would require another change of direction from the central bank.

“You don’t have to agree with Fed policy to believe it,” said Lauren Goodwin, economist and portfolio strategist at New York Life Investments.

Goodwin pointed out that the overwhelming majority of Fed voting members at the last meeting predicted a Fed Funds Rate of 5% or higher this year. And given the concerns some central bankers have expressed about the consequences of pausing too early, they may be determined to hit that mark.

“With a relatively high degree of unity and conviction, they have said they will raise interest rates 25 basis points higher than the market is saying. And frankly, unless we see inflation slowing or economic growth collapsing quickly… I don’t think they’ll change their minds,” Goodwin added.

– Jesse Pound

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Consumer sentiment rises for the second month in a row

The University of Michigan said its consumer sentiment index rose for the second straight month, although it remains at historically low levels. The index rose to 64.6 from 59.7 in December. However, it is still around 4% below the previous year’s level.

“Uncertainty about both inflation expectations remains high, and changes in global factors in the coming months could reverse recent improvements,” said Joanne Hsu, director of Surveys of Consumers.

—Fred Imbert

https://www.cnbc.com/2023/01/16/asia-pacific-us-sees-inflation-ease.html Japanese wholesale price, China Covid, US inflation