• Spiralling Eurozone PPI could spook markets
• US wage growth set to remain well below inflation despite workforce shortages
• UK consumer borrowing expected to increase but remain well below pre-pandemic levels

Despite a number of markets being closed on Monday, it’s set to be a busy week for economic data, with the Chinese Caixin Manufacturing PMI data for December being slated for release on Tuesday. This will be under scrutiny given the corresponding government produced NBS figure managed to hold above the break-even mark when it was released on December 31^st. Forecasts suggest this reading could come in bang on 50, which indicates no expansion, but would at least be an improvement on the 49.9 posted in November.

German Retail Sales for November are also due Tuesday, with expectations being that both the monthly and annualised figures will post material declines. Given the surge in COVID cases in the latter part of the year, this would be expected, but the scale of the slide, expected to be down almost 5% on the year, could raise fresh concerns over the pace of any wider Eurozone recovery, too.

Assorted UK Consumer Borrowing readings for November will be released on Tuesday, too, with the aggregate net lending to individuals print making for a good all-round measure. This is expected to come in at almost £4 billion, well up from the £2.3 billion printed in October, although still below the pre-pandemic average which ran at around £5 billion. The prospect of rising interest rates and broader economic uncertainty may however be constraining activity here and again that could weigh on the outlook for consumer stocks and Sterling if it serves as a warning bell to the Bank of England.

Rounding out a busy first day back will be the JOLT Job Openings from the US for November. Whilst these numbers are somewhat aged, they’re expected to once again sit well in excess of 10 million, which is something of a conundrum given stubborn wage growth in the US, especially in the face of rampant inflation. If this number can’t be brought down, it does pose a threat to sustaining economic growth in what – for now anyway – remains the world’s largest economy. 

Attention on Wednesday will be very much focused across the Atlantic with the ADP Payrolls for December acting as the usual curtain raiser ahead of Friday’s Non-Farms. Another solid figure here of around 500,000 is expected and really it would only be a notable shortfall that would have the potential to cause any great concern. That said, given bumper corporate profitability and the sheer number of unfilled vacancies, any issue here can be resolved by employers accepting they need to be paying more.

Also on Wednesday, the FOMC Meeting Minutes will be published and after the last session set the scene for some fairly brisk policy tightening in 2022, the market will now be looking for any clues over the longer term outlook. Although higher borrowing costs have already been factored in, anything that offers more visibility could see both the dollar and stocks with US dollar earnings being influenced.   

Thursday sees the publication of Eurozone Producer Price Index data for November and this is likely to serve as a wakeup call for policymakers. Rising energy and raw materials prices are having a big impact here, with speculation that the annualised figure could be close to 25%. Some of that will have to filter down into prices paid by consumers, suggesting that even though inflation is already marching higher – there’s an update due on that tomorrow – that at least the first part of 2022 is going to remain challenging for the general public. 

Friday will see Eurozone Flash Inflation for December being released, with expectations that this will advance from the 4.9% printed in November, breaking above 5%. Certainly given the pace of rising input prices there will be little reaction to a punchy figure here, but with living costs increasing so sharply, the ECB will have to maintain its stance over monetary stimulus.  

Rounding out the week we have the usual Non Farm Payrolls and accompanying employment metrics from the US for December. Looking beyond the headline jobs count however, average hourly earnings will be very much in focus. These are forecast to drop to a 4.1% increase on an annualised basis, which is well below the 6.2% inflation rate and this disparity starts to ask questions over the economic outlook into 2022, especially given the number of unfilled vacancies. With the employment rate set to dip down as low as 4% too, that’s also on target to reach the “frictional” point soon – wage growth looks increasingly imminent, but add this to rising interest rates and it could again mean the early part of the year will be challenging for many consumers.

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