Week Ahead Economic Preview: Week of 25 December 2023

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Worldwide PMIs, US payrolls, eurozone CPI ring in the new year

2023 draws to a close with a multitude of tier-2 data updates to inform us on the latest economic conditions into the year end, while 2024 will kickstart with worldwide PMIs, Fed minutes and December's US labour market report. Additionally, inflation updates are also eagerly anticipated from various regions such as the eurozone.

"Transitory" and "Convergence" were two words used to sum up the year in our latest Q4 PMI webinar, illustrating the changing nature of economic conditions in 2023. While we commenced the year seeing the service sector basking in the first year of unfettered travelling post the Covid-19 pandemic, convergence soon took place into the latter half of the year as the "higher-for-long" rates outlook dampened spirits (read our "Shifting Sands" report). Through it all, PMI indicators have outlined the resilience of the labour market, albeit with some softening starting to show. Furthermore, PMI price indicators have also correctly pre-empted the rapid path lower for inflation, which brings us to the point where we are seeing the transition starting for central banks such the Fed, whose rhetoric has turned dovish.

Going into the final week of 2023 and watching the start of 2024, we continue to monitor lingering issues that will form the basis of expectations going into the new year. Crucially, employment conditions in the US will be watched via non-farm payrolls and unemployment. Early US flash PMI data have shown diverging employment trends in December, which was released after the decisive December Fed meeting with meeting minutes anticipated on the third day of the new year.

Developments on the inflation end will also serve as guideposts for interest rates in 2024, with December's flash eurozone CPI due in the first week of 2024. Referencing the HCOB Flash Eurozone PMI, some stubbornness with regards to inflation has returned in December.

Finally, to gain an overview of global economic conditions in the final month of 2023, worldwide PMI data will be released through the first week of the year with detailed sector data also anticipated to gain insights into the key drivers for economic trends in December.

Supply chains under spotlight again in 2024

Inflation has fallen faster than many had expected in the US and across Europe in recent months, albeit in line with the advance signals from the PMI surveys. The survey data tends to act with a lead on changes in CPI inflation, with services PMI data in particular acting as a reliable guide to core inflation, which is also coming down faster than many had anticipated.

As we outlined in our special report this week, while there are some signs of lingering stickiness in services inflation, a weakening demand environment is cooling labour markets, boding well for inflation pressures to continue to moderate in the months ahead.

The focus now turns to what could possibly cause inflation to re-ignite globally. One area of concern is supply chains. Tensions around the Israel-Gaza war have disrupted shipping in the Red Sea, with Yemen-based Houthi militant group attacks diverting a vast proportion of global container vessels from the Suez Canal to a lengthier route around the Cape of Good Hope. The disruptions come at a time when container transport through the Panama Canal is being throttled to a substantial degree by low water levels. As our chart below illustrates, any lengthening of supplier delivery times tends to quickly feed through to higher prices for those goods.

Our analysts note also that an uptick in attack incidents targeting shipping would also significantly increase the risk of regional conflict escalation between the US and Iran as a result of the perceived risks to global hydrocarbon trade, which would in turn put upward pressure on energy prices. S&P Global's Maritime, Trade & Supply Chain business is monitoring the situation closely in the Red Sea (see our latest update here, available to clients).

Key diary events

Monday 25 Dec 2023
US, Canada, Brazil, UK, Eurozone, Switzerland, Norway, Australia, New Zealand, India, Singapore, Hong Kong SAR, South Korea, Indonesia, Philippines, South Africa Market Holidays
Japan Leading Economic Index (Oct, final)
Taiwan Industrial Production (Nov)
Taiwan Retail Sales (Nov)

Tuesday 26 Dec 2023
UK, Eurozone, Switzerland, Norway, Australia, New Zealand, Hong Kong SAR, South Africa Market Holiday
Japan Unemployment (Nov)
Thailand Trade (Nov)
Singapore Inflation (Nov)
Singapore Industrial Production (Nov)
Turkey Business Confidence (Dec)
United States Chicago Fed National Activity Index (Nov)
United States House Price Index (Oct)

Wednesday 27 Dec 2023
South Korea Consumer Confidence (Dec)
Japan BoJ Summary of Opinions (Dec)
China (Mainland) Industrial Profits (Nov)
Taiwan Consumer Confidence (Dec)
Japan Housing Starts (Nov)

Thursday 28 Dec 2023
South Korea Business Confidence (Dec)
South Korea Industrial Production (Nov)
South Korea Retail Sales (Nov)
Japan Industrial Production (Nov, prelim)
Japan Retail Sales (Nov)
Thailand Industrial Production (Nov)
Spain Retail Sales (Nov)
Hong Kong SAR Trade (Nov)
Turkey TCMB Meeting Minutes
United States Goods Trade Balance (Nov)
United States Wholesale Inventories (Nov)
United States Pending Home Sales (Nov)

Friday 29 Dec 2023
South Korea Inflation (Dec)
Australia Housing Credit (Nov)
Turkey Trade (Nov, final)
United Kingdom Nationwide Housing Prices (Dec)
Spain Inflation (Dec, prelim)
Brazil Unemployment (Nov)
India Current Account (Q3)
South Africa Trade Balance (Nov)

Saturday 30 Dec 2023
United Kingdom Nationwide Housing Prices (Dec)

Sunday 31 Dec 2023
China (Mainland) NBS PMI (Dec)

Monday 1 Jan 2024
US, Canada, Brazil, UK, Eurozone, Switzerland, Norway, Australia, New Zealand, Japan, Mainland China, Singapore, Hong Kong SAR, South Korea, Taiwan, Indonesia, Philippines, South Africa Market Holidays
South Korea Trade (Dec)

Tuesday 2 Jan 2024
Worldwide Manufacturing PMIs, incl. global PMI* (Dec)
Indonesia Inflation (Dec)
Brazil Trade (Dec)

Wednesday 3 Jan 2024
Singapore GDP (Q4, adv)
Turkey Inflation (Dec)
Spain Unemployment (Dec)
Germany Unemployment Rate (Dec)
Mexico Business Confidence (Dec)
United States ISM Manufacturing PMI (Dec)
United States JOLTs Job Openings (Nov)
United States Fed FOMC Minutes (Dec)

Thursday 4 Jan 2024
Worldwide Services, Composite PMIs, inc. global PMI* (Dec)
France Inflation (Dec, prelim)
United Kingdom Mortgage Lending and Approval (Nov)
Germany Inflation (Dec, prelim)
United States ADP Employment Change (Dec)
United States Initial Jobless Claims

Friday 5 Jan 2024
Philippines Inflation (Dec)
Thailand Inflation (Dec)
Japan Consumer Confidence (Dec)
Singapore Retail Sales (Nov)
Germany Retail Sales (Nov)
United Kingdom Halifax House Price Index* (Dec)
Switzerland Retail Sales (Nov)
Taiwan Inflation (Dec)
Eurozone HCOB Construction PMI* (Dec)
France HCOB Construction PMI* (Dec)
Germany HCOB Construction PMI* (Dec)
Eurozone Inflation (Dec, flash)
Italy Inflation (Dec, prelim)
Brazil Industrial Production (Nov)
Canada Trade (Nov)
Canada Employment (Dec)
United States Non-farm Payrolls, Unemployment,
United States Factory Orders (Nov)
United States ISM Services PMI (Dec)

Special reports

Flash PMIs point to widening growth divergences as 2023 draws to a close - Chris Williamson

Philippines economy shows robust growth into the new year - Rajiv Biswas

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Purchasing Managers' Index™ (PMI^®) data are compiled by S&P Global for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies, and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.

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