PMIs to offer investors update on health of global economy before US data steals show
Markets will get an update on the health of the global economy on Wednesday when the latest round of purchasing managers index (PMIs) are released.
The surveys, which measure private sector activity in January, will be released in the US, UK, Japan, and across the eurozone.
December’s PMI for the UK showed the services sector expanding at a fast pace while the manufacturing sector remained stuck in a slump.
With inflationary pressures easing further, economists expect continued strength in the services sector as well as a slight recovery in manufacturing. This would lead to a slight improvement in the overall reading.
In the eurozone meanwhile, economists expect to see a significant improvement in the manufacturing sector. However, this will not be enough to stop the bloc from facing an eighth consecutive month of contraction.
Investors looking at the US will have a wealth of data to examine this week beyond the PMIs.
Flash estimates for GDP in the fourth quarter will be released on Thursday with markets expecting the world’s largest economy will grow at a healthy two per cent.
However, analysts warned this might be as good as it gets for the US economy for a number of months.
“With the lagged impact of higher interest rates still feeding through and the cushion of pandemic-era excess savings now fading, we suspect that households will suffer a little more in the first half of this year,” Andrew Hunter, deputy chief US economist at Capital Economics said.
The Fed’s preferred gauge of inflation, the personal consumption expenditures (PCE) price index, will also be released on Friday.
The PCE price index frequently updates its basket of goods to reflect typical household expenditure. In November, the PCE index fell to 2.6 per cent. Economists expect it to remain unchanged in December, which would take the six-month annualised rate below two per cent.