CPI, GDP, PCE & More: What to Expect from Friday’s Economic Data?

This week is expected to end with releases from some of the world’s leading economies as data from Japan to the UK and the US is scheduled to be reported on Friday, December 22. 

What will these various releases reveal about the state of the global economy as we head into the holiday shopping season and the new year? 

Here’s what you need to know before the financial markets close for the Christmas break:

Japan CPI: Is Inflation Slowing in the World’s Third-Biggest Economy?

On Friday, December 22, Japan’s Consumer Price Index (CPI) data will be released, providing an overview of inflation rates in the world’s third-largest economy. 

According to a Reuters poll, the data reflecting November’s inflation rate is expected to show a slowdown primarily driven by lower energy prices. On the flip side, accommodation prices “remained high.” 

Some economists, such as Takeshi Minami from the Norinchukin Research Institute, also believe that Japan’s inflation “has peaked,” hence signaling the possibility of lower inflation rates. 

Additionally, it may be interesting to note that November’s exports are expected to demonstrate slight growth due to the economic slowdown, mainly influenced by China’s ailing economy. 

According to the poll, exports are projected to edge up 1.5% in November from the year-ago figures, marking a rise of 1.6% from October’s numbers. SMBC Nikko Securities economists suggest that “auto-related exports are expected to be firm thanks to easing supply constraints. But machinery-related shipments likely contracted due to the sluggish Chinese economy.”

On the other hand, imports are expected to show a drop of about 8.6% in November, compared to the year-ago data. (Source: Reuters)

How Might the Upcoming CPI Data Affect the Bank of Japan (BoJ)?

The forthcoming release on Friday holds significant importance not just for consumers but also for Central Banks, particularly Japan’s Central Bank. 

This may be due to the fact that, despite the anticipated deceleration in inflation and even if the aforementioned forecasts come to fruition, Japan’s inflation rate is poised to remain above the 2% target set by the Bank of Japan (BoJ) for an extended period. 

In the recent monetary policy meeting held on December 19, the BoJ, renowned for its dovish stance, opted to maintain its existing rates. Furthermore, Governor Kazuo Ueda's remarks during the subsequent press conference painted an optimistic picture, expressing confidence in sustainable inflation and the upward trajectory of wages. He highlighted the increased likelihood of achieving the 2% inflation target and progressing steadily toward establishing stable 2% inflation.

As we await the unfolding of events, it remains to be seen how the imminent release and the dawn of the new year will influence the BoJ's decision-making process in its next meeting on January 22-23, 2024. 

Friday’s UK Retail Sales & Final Q3 GDP

Friday is an eventful day for the UK’s economy as Retail Sales and final revisions of Q3 Gross Domestic Product (GDP) are expected to be released. 

Some predictions suggest that November's UK Retail Sales are expected to grow 2.6% YoY. This growth was initially driven by Black Friday sales. 

Nonetheless,  the forecasts also suggest that while Black Friday sales initially boosted November’s data, the boost was short-lived, as many UK households restrained Christmas spending.

According to credit ratings company Moody's, consumers may have spent less ahead of the holiday season, mainly due to weaker consumer sentiment and lower purchasing power.

While the UK’s economic trajectory is yet to be determined, some predictions suggest that the country’s economy will likely grow by 0.5% in 2023, while the yearly inflation rates are believed to come in at 4.4%. Additionally, the UK’s unemployment rate is expected to be 4.3%. Only time will tell if these numbers will materialize. 

US PCE: What Will the Fed’s Favorite Inflation Gauge Reveal?

The US’ Personal Consumption Expenditures (PCE) is scheduled to be released this Friday. This economic indicator is believed to be among the Federal Reserve’s favorite inflation measures.

With the impending release, it is prudent for market participants to closely monitor the PCE result, especially in light of its potential impact on market trends and on the Federal Reserve's decisions in the near term.

Some analysts posit that Friday’s PCE data is expected to reflect a much-needed slowdown in inflation rates in November. Projections suggest that the Core PCE could reveal a monthly increase of 0.06% in November. Moreover, the projections suggest an annual rate of 3.1% in November, as opposed to October's 3.5%. 

The next FOMC meeting is scheduled for next year on January 25-26, so it may be interesting to see how Friday’s release will come into effect. 

Conclusion 

This week might reveal much-needed information about where the global economy may be headed in the new year and ahead of the holiday season and Christmas trading break. 

Therefore, keeping tabs on Friday’s data may be helpful to one’s overall understanding of the markets and the economy.