Week Ahead – China GDP and December CPI reports eyed amid rate cut frenzy
XM Group | Jan 12, 2024 09:58AM ET
- China reports Q4 GDP data on Wednesday; is a rebound in store?
- CPI numbers due in UK, Japan and Canada
- Retail sales to be the main focus in the US
Is China’s recovery getting back on track?
The Chinese economy suffered several wobbles in 2023, as the property crisis went from bad to worse. Markets held their breath for a major stimulus announcement, but with one eye on deleveraging, authorities’ response only went as far as offering targeted drip-feed measures, leaving investors flabbergasted and disappointed.
However, the government’s efforts may not have been totally in vain as Chinese consumers have been spending more since the summer and industrial production has also been rebounding. The property sector remains a significant risk but there are signs that the market is stabilizing. Hence, GDP growth likely quickened in the final quarter of 2023 to 5.3% y/y after slowing to 4.9% y/y in the third quarter. A Q4 reading of slightly above 5.0% y/y would ensure that the government meets its growth target of around 5.0% for the full year.
There could be a further setback for the yen on Friday as CPI is projected to have eased from 2.5% to 2.3% y/y in December. Although it’s unlikely that inflation in Japan will reaccelerate much over the next few months, as long as it holds above 2%, that would be enough for the BoJ to call time on negative interest rates. But for that to happen, policymakers will want to see stronger wage growth, which will only become evident after the spring wage negotiations.
For now, the yen will probably not react much to the December CPI data and at best, the incoming data can only provide some support. The other releases next week include corporate goods prices on Tuesday and machinery orders on Thursday.
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