Key economic surprises also came from Europe and Japan this week, rattling global markets and inspiring fears among investors. Australia announced strong employment growth, and the UK saw a jump in consumer inflation. South Korea’s strong industrial production and GDP growth surprised, and Japan’s new Finance Minister declared war on speculative forces in the currency market. At the same time, the United States is looking towards a major address by President Trump ahead of next week’s Davos economic forum.
Australia’s employment data—which was expected to have a strong turnaround in December—bore that out. The economy gained 27,000 jobs, recovering from a net loss of 21,300 jobs the prior month. This shift underscores what continues to be a tight labor market. It plays an important part in helping Australia’s national unemployment rate remain low at 4.3%. These positive employment numbers are good signs of economic resilience as the state continues to find its way through a challenging post-pandemic recovery.
United Kingdom’s Inflation and Consumer Prices
In the UK, CPI rose 0.4% m/m in December, close to market expectations. At the same time the year-over-year CPI increased to 3.4%, just above the expected 3.3%. A recent report by the Bureau of Labor Statistics indicated inflation is affecting consumers now more than ever. This trend, unfortunately, will be hard to ignore in future monetary policy decisions.
The Retail Price Index (RPI) made major headlines, rising a sensational 0.7% on the month, well above a projected 0.6%. On a year-over-year basis, the RPI hit 4.2%, surpassing the projected 4.1%. This backdrop of increased pressure on the UK’s cost of living crisis may well start to raise awareness among policymakers that intervention is necessary.
“Uncertainty was more serious.” – ECB Chief Lagarde
South Korea’s Economic Resilience
Late last week, South Korea reported its fourth-quarter advance GDP figures, showing a QoQ growth of 0.2%, right in line with expectations. Year-over-year growth at 1.9%, just coming in above the previous 1.8%. These results indicate a stable economic environment despite global uncertainties and suggest that South Korea is maintaining its growth trajectory.
The economic optimism coming from South Korea is certainly deserved as the nation slowly but surely adjusts to a new global reality. The country’s central bank has taken measures to support growth while keeping inflation within target limits, contributing to overall economic stability.
Japan and Global Market Concerns
Japan’s Finance Minister, Katayama, in response to recent yen volatility, reaffirmed steps taken to stabilize yen trade, insisting that investors should calm down. Highlighting her commitment, Kuroda said she would intervene in the foreign exchange market as needed to shore up the yen with rising currency market volatility.
“It was time for Europe to wake up amid US threats.” – ECB’s Villeroy
This statement accentuates the escalating fears from European leaders of such adverse economic impacts arising from destabilizing U.S. policies. What happens next with Japan’s approach will certainly be watched by investors around the world.
The upcoming speech by United States President Trump at the World Economic Forum in Davos is anticipated to draw significant attention. Analysts are particularly eager to learn his take on what’s going on, economically, domestically and abroad, and what trade policies might be set to affect global markets.
Representatives from Germany have confirmed plans to issue an additional €2 billion of Bunds. This new sale will occur in 2041 and 2056 under the country’s current economic plans. Canada is set to sell 30-year bonds, reflecting a broader trend among nations seeking to manage their debt effectively while maintaining investor confidence.
Indonesia’s Central Bank held its policy steady as expected. This proactive policy shift seeks to keep inflation from moving above target and supports and strengthens ongoing economic expansion. This ruling serves as a stark reminder of the need for consistent monetary policy in pursuit of broader economic goals.