Weekly Market Outlook: This week investors will focus on China’s fourth-quarter GDP release, along with December’s industrial output and retail sales. No changes are expected from the central bank meeting in Japan. The UK’s labor market and inflation data will take center stage. Among the most notable data are Canadian CPI figures, BOE Governor’s speech, Japanese inflation, and Australian employment data.
China’s Economy Grew 8.1% in 2021
Chinese National Bureau of Statistics reported that the economy grew by 4% in the fourth quarter, faster than the 3.6% expected. In 2021, the economy grew 8.1% supported by the steady rise in industrial production which offset the decline in retail sales. Industrial production grew by 4.3%, while retail sales rose by only 1.7% in December. For the whole year, however, retail sales rose by 12.5% recovering from 2020’s drop, exceeding 2019 levels.
Bank of Japan is Raising its view on Inflation
The monetary policy is likely to be maintained by the Bank of Japan in January. The bank is expected to keep interest rates in the negative territory at -0.10% while maintain its extra loose policy due to weak inflation. Following the recent remarks of Governor Haruhiko Kuroda, the BOJ’s quarterly report on prices and growth outlook will be of the utmost importance, especially since energy costs are expected to rise gradually.
Additionally, the BOJ will revise its economic growth forecasts for fiscal years 2022-2023 in its quarterly outlook report on Tuesday.
UK and Canadian Inflation to be Watched
UK inflation data is due this week. Annual inflation is expected to accelerate to 5.2% in December 2021 while core inflation is projected to drop down to 3.9%. After a surprise rate hike in December, the upcoming inflation data will be watched carefully for clues about how the BoE will manage its tightening phase this year.
Employment data are also expected to show a solid labor market with unemployment rate holding at the lowest level since mid-2020 at 4.2%. However, wage growth is expected to slow further to a 12-month low.
BoE’s governor is due to testify, along with BOE Deputy Governor Jon Cunliffe, on the Bank of England Financial Stability Report before the Treasury Select Committee.
Canada’s inflation and retail sales figures will be released as well, with an eye on whether price pressures have eased in the final month of 2021.
Australian Job Data in Focus
The Australian economy is expected to add 60 thousand jobs in December, while unemployment rate is seen at new lows at 4.5%. Strong employment growth will probably support the Reserve Bank of Australia’s confidence in a post-Delta economic recovery.
Upcoming data will help in providing clue whether the RBA intends to to end its bond purchases in February as scheduled and rise interest rates from the pandemic lows of 0.10%.
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