Last week’s highlights
Australia building permits jump over 10% in December
As expected, the total number of building permits issued in December rose 10.9% on the month in Australia.
In the previous month, building permits rose by 2.6%. Private sector homes saw the biggest gains, as permits grew at a rate of 15.8% on the month.
Meanwhile, permits for private sector dwellings rose by 2.3%. On a year over year basis, Australian building permits climbed 22.8%.
The housing permits data comes as consumer confidence measures are showing a modest improvement post-lockdown.
Powell: US job market still a long way from recovery
The Federal Reserve Chairman, Jerome Powell spoke at the Economic Club of New York on Wednesday last week.
The Chairman of the Federal Reserve said that the US job market was a long way off from a full recovery. He called on both the private and the public sector to support workers.
The speech comes as the latest January jobs report saw the nonfarm payrolls rising 49k with the data for the previous two months revised down by 159k.
Powell’s speech cemented the fact that the Fed will maintain interest rates at the current levels for the foreseeable future. The comments also squashed some speculation that the Fed would taper its QE purchases.
US inflation unchanged in January
The latest consumer price index data, a key measure of prices paid by US consumers was unchanged in January. This marks a second consecutive month when consumer prices were unchanged, underscoring the impact of the pandemic.
The headline CPI rose by 0.3% on a monthly basis but was unchanged at 1.4% on the year. Meanwhile, the core CPI data which excludes the volatile food and energy prices rose by 0.2% on the month while increasing 1.4% on the year.
Economists expect that inflation will firm in the coming months, especially if Congress passes another aid package.
UK economy contracts at a record pace in 2020
The impact of the pandemic was felt sharply in the UK economic activity.
According to official reports, the economy contracted at the sharpest pace since 1709. GDP fell by 9.9% in the year ending December 2020, with all four sub-sectors posting declines.
In 2019, economic activity grew at a pace of 1.4%. On a quarterly basis, GDP rose by 1.0% after a revised 16.1% increase in the third quarter.
However, the lockdown in the fourth quarter kept the economic rebound in check. The construction sector fell the most, by 12.5%, followed by the services sector and then the production sector.
Consumer sentiment in the US falls in February
The latest consumer sentiment survey from the University of Michigan saw a decline in February. The consumer sentiment index fell to 76.2 in February, following a drop to 79.0 in January.
The data was well off the estimates. Economists forecast that the consumer sentiment index would pick up to 80.8 during February. February’s decline in the consumer sentiment index was also the lowest since August of 2020.
Consumer expectations fell to 69.8 from 74.0 previously while the current economic conditions index fell from 86.7 in January to 86.2.
Upcoming Economic Events
Japan Q4 GDP may have slowed
Japan will be releasing its quarterly economic data covering the three months ending December 2020.
According to economists polled, GDP growth is set to rise at a slower pace of 10.1% on a seasonally adjusted quarterly basis. This marks a nearly 50% slower growth rate compared to the third quarter last year.
Japan’s economy grew at a pace of 22.9% in the three months ending September 2020. Exports are seen as one of the main drivers of the GDP during the reporting quarter.
On the other hand, a drop in inventories is expected to offset the gains from the export sector. On a quarterly basis, GDP is forecast to rise 2.4%, down from 5.3% in the third quarter.
Australia unemployment rate to fall in January
Australia will be releasing its monthly labor market data. The headline estimates point to the unemployment rate improving while the participation rate remains steady.
Economists forecast that Australia’s unemployment rate will fall from 6.6% in December to 6.4% in January. The participation rate is forecast to remain steady at 66.2%, unchanged from the previous month.
The total jobs added to the economy is forecast to be around 40k, slightly down from 50k previously. The improved jobs data comes on the back of rising job advertisements and business confidence.
Progress in regions such as Victoria is also showing a post-lockdown recovery.
Japan inflation to halve in January
Japan will be releasing its monthly inflation data. Estimates show that consumer prices improved marginally.
After falling by 1.2%, the national CPI data on the year is forecast to fall by just 0.6%. On the other hand, the core CPI data, excluding the volatile food and energy prices, is forecast to fall 0.6%, following a one percent decline on the year ending December 2020.
Despite the somewhat optimistic headline print, data shows that underlying price pressures remain weak. In December, there was a 3.2% drop in wages. This was due to a drop in bonus payments.
The lower wage growth is negative for consumer spending. Meanwhile, accommodation costs could improve following the government suspension of travel promotion, helping to lift the core CPI data somewhat better than the previous month.
UK inflation to rise at a slower pace
The latest consumer price index data will be coming out for the UK this week.
The annual CPI data, however, is forecast to rise at the same pace as the previous month, if not somewhat weaker.
Economists forecast that headline inflation will rise 0.6% – 0.5% on the year ending January 2020. In general, consumer prices in the UK will remain below one percent at least until the first quarter of 2021.
The core CPI excluding food and energy will be steady at 1.3% on a year over year basis.
Eurozone fourth-quarter GDP to fall 0.7%
The Eurozone will be releasing its quarterly GDP estimates this week.
Forecasts show that economic activity will contract by 0.7% during the period. This comes after the economic activity rebounded 12.6% in the third quarter.
Despite the rebound, the economic activity will contract by over 5% on average. Despite the backward-looking data, the latest estimates show that growth will pick up in 2021.
Estimates show that the yearly GDP will average around 3.8% this year and the next.