Written Commentary
Focus on US CPI, with China Home Prices and Eurozone Q4 GDP and Employment to digest; Munich Security Conference, BoJ, ECB, BOE and Fed speakers; rising tensions between US executive and legislature ahead of mid-term elections a key overarching theme.
- US CPI: headline and core CPI seen somewhat elevated m/m, but easing in y/y terms, very conflicting anecdotal evidence on goods price trends, but gasoline, autos and medical care should help to dampen pressures elsewhere.
EVENTS PREVIEW
US CPI dominates the statistical schedule, with detailed report on Eurozone Q4 GDP accompanied by Q4 Employment ahead of that, as another unsurprising fall in China’s Home Prices is digested, as it shuts down until February 23 for the Lunar Year holidays. Geopolitically, the focus will be on this year’s Munich Security Conference, with energy security high on the agenda, along with a good deal of likely, often heated discussion about the need to realign defence alliances in the face of the shift in the US to a ‘Donroe doctrine’. Just as important is keeping a close eye on rising tensions between the US executive and the legislature, with Congress voting to overturn tariffs on Canada earlier in the week, and the White House contemplates rowing back tariffs on steel and aluminium as it attempts to convince the public at large that it is dealing with ongoing and very elevated cost of living pressures, which remains at the top of the list of voters concerns ahead of mid-term elections. There are also a good number of Fed, ECB and BoE speakers, though the typically hawkish overnight comments from BoJ’s Tamura may prove to be the most significant of these. Next week’s schedule is quite light in terms of US statistics with the most of the data being for December, including Personal Income & PCE. Japan looks to Q4 prov. GDP, Trade, Machinery Orders and National CPI, the UK to CPI, labour data and Retail Sales, and G7 and India ‘flash’ PMIs also on tap. January Fed minutes, corporate earnings from many major mining companies, including Anglo American, BHP, Glencore and Rio, along with Walmart, and Friday bringing a US Supreme Court session which may or may not offer a ruling on tariffs, while the India AI Impact Summit lists both Nvidia CEO Huang and Alphabet CEO Pichai amongst its keynote speakers.
** U.S.A. – January CPI **
The consensus looks for headline and core CPI to be up 0.3% m/m, pushing y/y rates down to 2.5% respectively, and while the seasonal adjustment tries to iron out the typical annual price hikes that occur in January, it is a far from perfect process. Anecdotal evidence on prices have offered very conflicting signals on goods price inflation, though gasoline, autos and medicines should help to lean against upward pressures on goods prices, particularly electronics. It will also take another couple of months to iron out the distortions from the lack of data for October, and there are also annual index weight revisions to consider, leaving plenty of scope for an outlier. A close eye also needs to be kept on household utilities inflation which is running hot (Dec Energy Services 7.7% y/y, Electricity 6.7%, Utility Gas 10.8%). An afterthought on Wednesday’s Payrolls, markets always try to be forward looking, but it seems to be unwise to assume that the much stronger than expected 130K headline and 172K Private Payrolls increases signal a sustained trend change, when a) this series is always volatile and subject to revision, and b) average 2025 monthly Payrolls gains were revised down from 49K to just 15K. The latter suggests it will be a few months before one can assert that labour demand has picked up substantially from a very weak 2025.
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