US durable goods orders fell -2.2% mom to USD 276.1B, much worse than expectation of 0.8% mom. Transportation equipment, down four of the last five months, drove the decrease, down by -7.4% mom to USD 86.1B.
Ex-transport orders rose 0.3% mom to USD 189.9B, slightly below expectation of 0.4% mom. Ex-defense orders fell -3.1% om to USD 258.2B.
Full US durable goods orders release here.
Germany’s economic challenges were laid bare today as BDI President Peter Leibinger warned of a “deep economic crisis” during the annual press conference.
The country’s economic output is expected to shrink slightly this year, with Leibinger emphasizing that the situation reflects more than just short-term shocks like the pandemic or the war in Ukraine.
Instead, he highlighted long-term “structural” weaknesses that have plagued Germany as a business hub, particularly over the past six years.
Leibinger pointed to the “structural break” in industrial growth, with empty order books, idle machinery, and a marked decline in domestic investments.
His remark, “I cannot remember such a bad mood in industrial companies,” underscores the deep malaise gripping the sector.
German industry is not only struggling to compete globally against powers like the US and China but is also falling behind within the European Union.
Australia’s NAB Business Confidence showed slight improvement in December, rising from -3 to -2, but remains below the long-term average since early 2023. Business Conditions, on the other hand, posted a stronger gain, climbing from 3 to 6.
Breaking down the details, trading conditions improved from 6 to 9, profitability rose from 0 to 4, and employment conditions ticked up from 3 to 4..
Price pressures continue to persist, with purchase cost growth rising slightly to 1.5% in quarterly equivalent terms. Labour cost growth edged lower to 1.4%, but output price growth increased by 0.3 percentage points to 0.9%. Retail prices also ticked up to 0.7%.
According to NAB Chief Economist Alan Oster, “The uptick in purchase cost growth and final product prices reminds us that businesses continue to face some price pressures.”
SNB Chair Martin Schlegel said on Monday that while the central bank is reluctant to reintroduce negative interest rates, it cannot rule them out entirely.
He stated, “negative interest rates have served their purpose, but it is not something the SNB would do lightly,” .
Schlegel also downplayed the risks of deflation, noting that occasional months of negative inflation “is not a problem”.
“Our concept is price stability over the mid term,” he emphasized.
Markets currently see 64% chance of SNB cutting rates from 0.5% to 0.25% in March, with a 27% likelihood of a further cut to 0% by June.
German Ifo Business Climate ticked up from 84.7 to 85.1 in January. Current Situation Index also rose form 85.1 to 86.1. But Expectations Index fell from 84.4 to 84.2.
By sector, manufacturing fell from -24.9 to -25.3. Services rose from -5.6 to -2.2. Trade was unchanged at -29.5. Construction dropped notably from -26.2 to -28.2.
Ifo said that despite the slight improvement, “companies continue to be pessimistic”.
China’s manufacturing activity slipped into contraction in January, with NBS Manufacturing PMI falling from 50.1 to 49.1, missing expectations of 50.1. This marks the first contraction since October and the lowest reading since August.
The decline was attributed to Lunar New Year holiday, as workers left early, according to NBS senior statistician Zhao Qinghe. Analysts also noted potential effects from slowing export demand after earlier front-loading tied to trade concerns.
The services sector showed similar weakness, with the Non-Manufacturing PMI dropping from 52.2 to 50.2, below the expected 52.0. Composite PMI, combining manufacturing and services, slipped to 50.1 from 52.2, reflecting a broad deceleration.
While some of this is likely seasonal, the magnitude of the slowdown raises concerns about underlying economic momentum, especially with external pressures like trade tensions still in play.
US PMI data for January painted a mixed picture. PMI Manufacturing rose from 49.4 to 50.1, reaching a seven-month high and signaling a return to slight expansion. However, PMI Services dropped sharply from 56.8 to 52.8, a nine-month low, dragging PMI Composite down from 55.4 to 52.4, also a nine-month low.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, highlighted that US businesses are starting 2025 in an “upbeat mood,” with optimism about the new administration driving stronger economic growth. Despite the slowdown in output growth, “sustained confidence” among businesses suggests this deceleration may be temporary. Encouragingly, hiring has surged, with job creation reaching its fastest pace in two and a half years, signaling resilience in the labor market.
However, inflationary pressures are resurfacing, posing risks to the economic outlook. Companies have reported “supplier-driven price hikes” and “wage growth amid poor staff availability.” Inflation in input costs and selling prices has been “broad-based across goods and services,” which, if sustained, could fuel concerns about hawkish policy approach from the Fed.
UK PMI Composite rose slightly from 50.4 to 50.9 in January, indicating marginal growth. Manufacturing PMI improved from 47.0 to 48.2, while services PMI ticked up from 51.1 to 51.2. Despite these increases, the overall outlook remains gloomy, with underlying concerns about economic weakness and inflationary pressures persisting.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, warned that the data “add to the gloom” surrounding the UK economy.
Companies are cutting jobs at the fastest rate since the global financial crisis in 2009, reflecting falling sales and bleak business prospects. Business optimism remains at its lowest levels in two years, accompanied by subdued activity across sectors.
Inflationary pressures have also “reignited,” creating what Williamson described as a “stagflationary environment” and a “policy quandary” for BoE.
Eurozone PMI data for January showed cautious improvement, with PMI Composite rising from 49.6 to 50.2, a five-month high, signaling a return to marginal growth. Manufacturing PMI increased to 46.1, its highest in eight months, while services PMI slipped slightly to 51.4 but remained in expansion.
Germany led the improvement, with its PMI Composite climbing from 48.0 to 50.1, marking a seven-month high and a return to expansionary territory. Meanwhile, France lagged behind, with its PMI Composite increasing to 48.3 but remaining below the 50 threshold, indicating continued contraction.
Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, described the data as “mildly encouraging.” He noted that the private sector had entered a phase of cautious growth, with reduced drag from manufacturing and moderate expansion in services. Germany’s strong rebound played a key role in offsetting the continued weakness in France.
Inflationary pressures, however, remain a concern ahead of next week’s ECB meeting. Input prices in manufacturing rose for the first time in four months, driven by a weaker euro and Germany’s increased CO2 tax. In the services sector, cost inflation persisted, largely due to higher wages. Selling prices in services also remained elevated.
Due to persistent inflation risks and the fragile state of the economy, ECB is likely stick to its gradual pace of cutting interest rates.
BoJ raised its uncollateralized overnight call rate by 25bps to 0.50% as widely expected, marking the highest level since 2008. The decision, made by an 8-1 vote, saw dissent from board member Nakamura Toyoaki, who advocated for a delay until March.
In the new economic projections, core CPI forecasts were significantly revised upward from 1.9% to 2.4% for fiscal 2025, and slightly from 1.9% to 2.0% for fiscal 2026. Core-core CPI (excluding energy and fresh food) forecast was also raised from 1.9% to 2.1% for fiscal 2025, remaining unchanged at 2.1% for fiscal 2026. Real GDP growth projections were left steady at 1.1% for fiscal 2025 and 1.0% for fiscal 2026.
At the post-meeting press conference, Governor Kazuo Ueda downplayed the sharp inflation forecast revisions, stating, “The rise in underlying inflation is moderate. I don’t think we are seriously behind the curve in dealing with inflation.”
He reiterated the importance of a gradual approach to policy adjustments, and there no “preset idea” on the timing and pace of rate hikes. He also highlighted the estimated neutral range of 1%-2.5%, emphasizing that the current rate of 0.5% still has “some distance” to reach neutral.
Also released, CPI core (ex-food) jumped from 2.7% yoy to 3.0% yoy in December, marking the highest rate in 16 months. CPI core-core (ex-food & energy) was unchanged at 2.4% yoy. Headline CPI rose from 2.9% yoy to 3.6% yoy.
Full BoJ statement and outlook for economic and prices.
Canada’s retail sales were flat in November, falling short of the expected 0.2% mom increase. The data revealed mixed performance across sectors, with declines in six out of nine subsectors.
Sales at food and beverage retailers dropped by -1.6% mom, driving much of the weakness in the report. However, gains in motor vehicle and parts dealers (+2.0% mom) and gasoline stations and fuel vendors (+0.7% mom) helped offset the broader declines, preventing an outright contraction in overall retail activity.
Core retail sales, which exclude the more volatile categories of motor vehicles and gasoline, declined by a notable -1.0% mom.
US initial jobless claims rose 6k to 223k in the week ending January 18, above expectation of 220k. Four-week moving of initial claims rose 750 to 213.5k.
Continuing claims rose 46k to 1899 in the week ending January 11, highest since November 13, 2021. Four-week moving average of continuing claims rose 500 to 1866k.
Gold prices surged past 2750 mark this week, supported largely by a weaker Dollar. The overall market sentiment is on a relatively calmer backdrop, with US President Donald Trump’s decision to delay tariff implementations contributed to easing trade-related fears. Additionally, geopolitical tensions receded as a ceasefire between Israel and Hamas took hold earlier in the week.
Hence, as whether Gold can break its record high of 2789 will depend largely on the depth of Dollar’s correction in the coming days.
Technically, Gold’s rebound from 2536.67 is currently seen as the second leg of the corrective pattern from 2789.92 high. Strong resistance could be seen from this resistance to limit upside. Break of 2689.21 support will argue that the third leg of the pattern has started back towards 2536.67 support. Nevertheless, decisive break of 2789.92 will confirm up trend resumption.
Silver’s performance, by comparison, has been relatively subdued. Its recovery from 28.74 remains weak and corrective in nature. For now, as long as 32.30 resistance holds, fall from 34.84 is still in favor to resume at a later stage, to 26.44 cluster support zone.
Japan recorded a trade surplus of JPY 130.9B in December, the first surplus in six months, driven by a 2.8% yoy rise in exports to JPY 9.91T. Imports also jumped, rising 1.8% yoy to JPY 9.8T.
However, exports to the two largest trading partners saw declines, with shipments to China falling by -3.0% yoy and to the US by 2.1% yoy.
On a month-on-month seasonally adjusted basis, exports rose 6.3% mom to JPY 9.44T. Imports increased 2.2% mom to JPY 9.47T, resulting in a seasonally adjusted trade deficit of JPY 33B.
For the entirety of 2024, Japan’s trade deficit narrowed significantly, shrinking by 44% from the previous year to JPY -5.33T. Exports reached a record high of JPY 107.09T, up 6.2%, bolstered by strong demand for vehicles and semiconductor-related products. Imports also rose by 1.8% to JPY 112.42T.
SNB Chair Martin Schlegel said today at the World Economic Forum in Davos that with the policy rate currently at 0.50%, “we still have some room” for adjustments. But he ruled out any firm commitment on future rate moves.
While negative rates remain an unpopular tool in Switzerland, Schlegel noted that the SNB would reintroduce them if deemed necessary to stabilize monetary conditions.
Looking ahead to the SNB’s next policy meeting in March, Schlegel indicated that the central bank will evaluate whether further rate adjustments are warranted.
“At the moment monetary conditions are appropriate. We decide from quarter to quarter and then we will see,” he said, refraining from estimating the likelihood of rates turning negative again.
Schlegel also addressed risks stemming from global uncertainties, particularly the tariff hikes proposed by Trump administration. While he downplayed the direct impact of such measures on Swiss inflation, he acknowledged that heightened global risks could bolster the safe-haven appeal of the Swiss Franc.
“Whenever there is a crisis, investors tend to buy the Swiss Franc,” Schlegel said, highlighting the currency’s role in monetary conditions alongside interest rates.
ECB President Christine Lagarde emphasized the central bank’s commitment to a “regular, gradual path” of monetary easing, citing progress in disinflation across the Eurozone.
Speaking to CNBC, Lagarde reiterated that the pace of rate cuts will depend on incoming data. Meanwhile, she described the neutral rate — where monetary policy neither stimulates nor restricts the economy — as between 1.75% and 2.25%.
Lagarde also acknowledged the divergence in monetary policy paths between ECB and Fed. She attributed this gap to differing economic circumstances, noting that the two central banks “did not reduce rates at the same pace.” Markets, she said, are pricing in “vastly different monetary policy moves” over the next few months, reflecting these fundamental differences.
On external risks, Lagarde played down concerns about inflation being exported to Europe from the US, suggesting that any reigniting of U.S. inflation would primarily impact the U.S. economy. She added, “We are not overly concerned by the export of inflation to Europe.” However, she acknowledged potential spillover effects through the exchange rate, which “may have consequences.”
Dutch ECB Governing Council member Klaas Knot expressed agreement with market expectations for rate cuts at the January and March meetings, saying he is “pretty comfortable” with them. However, he added it is “too early to comment” on further cuts beyond March.
“As long as the incoming data is in line with our projected return of inflation to target later this year then I think there is little obstacle to making another rate cut,” Knot said. “To change my mind for next week, it’s rather unlikely.”
Knot reiterated ECB’s trajectory toward a neutral policy stance. But he emphasized, “I’m not convinced yet that we need to go into stimulative mode as well.”
He expressed optimism that recent inflation data is “encouraging”. “It confirms the broad picture that we will return to target in the remainder of the year, and hopefully the economy will also finally recover a bit,” he added.
However, Knot flagged risks posed by US trade policies, describing punitive tariffs as a “clear downside risk on the horizon.”
Westpac Leading Index for Australia dipped slightly in December, moving from 0.33% to 0.25%. Westpac noted that while the growth signal remains modest, it reflects a marked improvement from the consistently negative and below-trend readings observed over the past two years. This uptick hints at a gradual lift in economic momentum through the first half of 2025.
Westpac forecasts GDP growth to improve steadily over the course of 2025, projecting a year-end expansion of 2.2%—a notable recovery from the weak 0.8% growth recorded in the year to September 2024. However, the bank noted that while this represents progress, it remains below the economy’s long-term potential.
Westpac highlighted that recent improvements in the Leading Index coincide with mixed signals on broader economy. A key concern for RBA is the labor market, where the “rebalancing” stalled in H2 2024.
“A further slowdown in underlying measures of inflation could still see the Bank ease in February or April but we suspect the RBA will need to be more comfortable about some of these risks before it is prepared to begin easing,” Westpac noted.
New Zealand’s CPI rose 0.5% qoq in Q4 2024, in line with expectations, as tradeable inflation increased 0.3% qoq and non-tradeable inflation rose 0.7% qoq. Annually, CPI was unchanged at 2.2% yoy, slightly exceeding the anticipated 2.1% yoy. This marks the second consecutive quarter that inflation has stayed within RBNZ’s target range of 1% to 3%.
The data highlights diverging trends within inflation components. Non-tradeable inflation, which reflects domestic demand and supply conditions and excludes foreign competition, stood at 4.5% yoy, highlighting persistent internal price pressures. Tradeable inflation, influenced by global factors, recorded a -1.1% yoy decline.
Rent prices were the largest contributor to the annual CPI increase, rising 4.2% and accounting for nearly 20% of the overall 2.2% gain. Lower petrol prices, down -9.2% yoy, offset some of the upward momentum, with CPI excluding petrol increasing 2.7% yoy.
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US consumer confidence falls to 104.1 as labor sentiment weakens
US Conference Board Consumer Confidence Index dropped to 104.1 in January, down from 109.5 and falling short of expectations at 105.7. Present Situation Index saw steep decline by -9.7 points to 134.3. Expectations Index fell by -2.6 points to 83.9, but remained above the critical recession signal threshold of 80.
Dana Peterson, Chief Economist at The Conference Board, noted that consumer confidence has been fluctuating within a relatively stable range since 2022. While January marked the second consecutive monthly decline, the index still falls within that range, albeit closer to its lower boundary.
Peterson added that consumers’ optimism about future business conditions and income also declined. Notably, December’s growing pessimism about future employment prospects was confirmed in January.
Full US consumer confidence release here.