The Week Ahead - 27 - 31 January 2025
These are the Key Macro Events for the upcoming week.
United States – On Wednesday evening the Fed meets for the first time this year. We, and consensus, expect them to hold rates at their current level for this meeting. The most exciting part of the press conference will likely revolve around Donald Trump's recent statements that he would ask Chair Powell to lower rates. The decision is followed the next day by Q4 GDP on Thursday and the PCE report on Friday.
We estimate a modest slowdown in q/q GDP growth at 2.8% SAAR down from 3.1% last quarter. Consumption is anticipated to be the primary driver, with an estimated growth of 3.6%. Investment is likely to have contributed only marginally, given the prevailing uncertainty. However, trade data for the first two months indicate that net exports might have had a positive impact this quarter.
We expect core PCE to come in as a low 0.2%, consistent with the 2% annual target, a good way to end the year. The y/y rate would then stay at 2.8%. Headline PCE comes in higher at 0.3% m/m due to a rise in fuel prices, raising the y/y rate to 2.5%. Personal spending likely grew by 0.5%, on the back of strong wage growth, with personal income increasing by 0.5%.
Eurozone – Despite weakness in Germany, France (Olympics payback), and more broadly in industry, eurozone aggregate activity data has come in on the firmer side in October and November, particularly consumption but also construction. As such, while we agree with consensus that growth will slow from Q3, we think the slowdown may be more shallow, to 0.2% q/q from 0.4% in Q3. For the ECB, the Governing Council is widely expected to lower the deposit rate by 25bp, to 2.75%. The ECB seems to have shifted its view more recently on tariffs towards the dovish side, and it will be interesting to see if this is expanded on in Lagarde’s press conference remarks. See our for more.
Germany - Q4 GDP growth is released coming Thursday and is expected to show a small contraction of 0.1% in the final quarter of 2024. A preliminary estimate for annual growth for 2024 was already released last week amounting to -0.2% for the year, from which the small contraction in Q4 follows. Looking forward to 2025, the outlook for the German economy remains bleak with structural challenges, especially for industry continue to weigh on the outlook. We do expect a small cyclical improvement as rising purchasing power and rate cuts feeding through to the economy should increase demand slightly.
China – On Monday, the official PMIs for January - published earlier than usual due to the Lunar New Year break starting on Tuesday – are expected to be stable compared to December, with the divergence between manufacturing (close to the neutral mark separating expansion from contraction) and services (well in expansion territory) continuing.