The final week of 2024 will be marked by a timely economic agenda. Some important data will be released on Monday, and activity will resume on Thursday after the New Year holidays. Despite the slower pace due to the festivities, the indicators released could provide valuable insights for the markets in 2025, especially regarding inflation, industrial performance, and unemployment in the main global economies.
Here are the week’s key events:
The week begins with important data for the global economy. Spain releases the Consumer Price Index (CPI), a key measure for understanding inflation in the country. Recent readings indicate values around 2%, in line with the medium-term target of the European Central Bank (ECB). Controlling inflation is essential to sustaining Spain's economic recovery and anchoring inflation expectations.
In China, two important indicators of economic activity will be released: the Manufacturing PMI and the Chinese Composite PMI. Both have been recording readings close to 50, a level that separates economic expansion from contraction. The PMI (Purchasing Managers Index) is a reliable barometer of economic performance, with significant impacts on the Chinese currency and global investor sentiment.
With the Chinese government implementing targeted stimulus packages, especially to reverse the crisis in the real estate sector, there is an expectation of improvements in future readings. These efforts aim to boost economic growth and restore confidence in the domestic and international markets.
Most Markets will be closed for the New Year holiday, marking the official end of 2024.
Most Markets will remain closed in celebration of the first day of 2025.
As business resumes, the focus will be on the manufacturing PMIs of several economies:
Spain: The Spanish Manufacturing PMI has been recording readings around 53, indicating optimism in the sector. This data may reinforce the perception that the Spanish manufacturing sector is relatively well positioned to start the new year.
Germany: The scenario is different here. With readings around 43, the German Manufacturing PMI points to a possible economic contraction in the short term. As Europe's largest economy, any sign of weakness in Germany tends to have repercussions across the economic bloc.
USA: The US Manufacturing PMI has been around 48, suggesting moderate pessimism in the sector. However, expansionary policies of the next Trump administration, with an emphasis on valuing domestic consumption, may bring improvements in the next readings, if new stimulus materialises.
In Germany, the unemployment rate will be the highlight. The latest readings show a persistent upward trend, raising alerts for the labour market at a time of economic slowdown. If the labor market continues to perform poorly in Germany, it could end up putting more pressure on the ECB to cut interest rates in the future to boost the economy. The problem with that approach is that economic growth usually comes with a price: inflation. This means that there is always a tradeoff between inflation and unemployment.
In the US, the ISM Manufacturing PMI will be released. With previous readings around 47, the sector faces significant challenges. This data will be closely watched as it can hint at the next steps that the new administration will have to take to keep the economy on track.
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