Summary
United States: Headline GDP Growth Overstates the Strength of the Economy
- Real GDP expanded at a 2.9% annualized pace in Q4. While beating expectations, the underlying details were not as encouraging. Moreover, the weakening monthly indicator performances to end the year suggest the decelerating trend will continue in Q1.
- Next week: Consumer Confidence (Tue), ISM Manufacturing (Wed), Employment (Fri)
International: Sentiment in Europe Is Improving, Bank of Canada Calls It Quits
- For most of 2022, we had concerns that the broader European economy could be on the verge of a deep recession. While a warm winter and falling inflation have not completely abated those concerns, they do lead us to believe the European economic downturn will not be as bad as initially expected. Elsewhere, one of the major central banks opted to formally pause rate hikes this week. Following a 25 bps hike to 4.50%, Governor Macklem of the Bank of Canada declared the central bank’s tightening cycle is over.
- Next week: Brazilian Central Bank (Wed), Bank of England (Thu), European Central Bank (Thu)
Interest Rate Watch: Fine-Tuning Fed Set to Hike Rates Next Wednesday
- We expect the Federal Open Market Committee (FOMC) to raise the fed funds target range by 25 bps at the conclusion of the FOMC meeting on Feb. 1. Ultimately, this meeting should signal that the Fed’s work this hiking cycle is nearer completion but not yet done.
Topic of the Week: Benchmarks and Broomsticks: A Guide to the Upcoming Changes to the Establishment and Household Survey Jobs Data
- Nonfarm payrolls have continued to expand at an impressive pace despite an increasingly challenging environment. But what if the recent strength of payrolls is a mirage? The annual benchmark revisions to payrolls are expected to show more robust hiring through early 2022, but will say little about how job growth has fared subsequently.
