Economy Spotlight: The Most Important Events and What's Coming 20-26/1/2025

Introduction:

Last week, the global economy faced a test titled “The Start of the 2025 Inflation Race,” which coincided with other important indicators and releases, such as US retail sales indicators, China’s GDP, in addition to many important releases on the level of US banks and the results of the largest global companies. In the “Economy Spotlight” report, we will discuss the most prominent of these indicators and events that precede Donald Trump’s assumption of the reins of his second non-consecutive term on the twentieth of this month.

Economy Spotlight. Major Economies:

First. The US Economy:

The US economy was on a date with inflation indicators for the year 2025 after successfully passing the labor market test, and for these markets to prove their strength and flexibility despite the high interest rates.

The US economy started last week with inflation data, especially with the producer price index, which rose moderately in December 2024, which analysts saw as not being enough to change the Federal Reserve's opinion on not cutting interest rates at its next meeting at the end of this month.

This opinion was further confirmed after the release of the consumer price index, which is the most important indicator for measuring US inflation, as the index rose on an annual and monthly basis according to expectations, while the core inflation index, which excludes food and energy, fell on an annual and monthly basis.

As for the retail sales index, it rose in December as families bought cars and a range of other goods, indicating strong demand in the economy and further strengthening the Federal Reserve's cautious approach to cutting interest rates this year.

The US economy also witnessed a series of quarterly financial statements from major banks, especially JP Morgan, Wells Fargo (the fourth largest US lender), Citigroup, Goldman Sachs, Bank of America and Morgan Stanley, which all delivered remarkable and notable performances.

BlackRock's assets hit a record high of $11.6 trillion in the fourth quarter of last year, as the world's largest money management company recorded a 21% jump in profits, supported by fee income from stronger stock markets.

The largest Taiwanese company also recorded very impressive performances, as TSMC recorded a 57% increase in revenues, with companies expecting similar profits supported by demand for artificial intelligence, with a focus on the fact that the company's clients are major US companies, led by Apple and Nvidia.

Meanwhile, the markets will await the results of major companies, most notably Netflix, P&G and Johnson & Johnson.

The US economy witnessed several economic indicators issued last week, the most important of which were:

• The producer price index rose less than expected, rising from 3% to 3.3%, which was less than the expected rise to 3.5%, while the index fell monthly from 0.4% to 0.2%.

• The consumer price index rose according to expectations on an annual basis from 2.7% to 2.9%, and from 0.3% to 0.4% monthly, while the core consumer price index fell on an annual basis from 3.3% to 3.2% and on a monthly basis from 0.3% to 0.2%.

• The deficit in US crude oil inventories rose from about one million barrels to about two million barrels.

• Unemployment claims rose more than expected from 203,000 claims to 217,000 claims.

• The Philadelphia Manufacturing Index (January), which reflects the state of the public sector, rose significantly to its highest level since 2021, recording 44.3, up from the deficit, which had recorded 10.9 in the negative range.

• Retail sales monthly for December, fell by half to 0.4%, better than expectations for a decline to 0.6%.

• Core retail sales (monthly) (December), rose less than expected, from 0.2% to 0.4%, compared to expectations for 0.5%

Second. European Economy:

The European economy witnessed many indicators and events during the past week, with oil being the most prominent issue on the European table.

Natural gas and crude oil prices rose in light of the sanctions imposed by the United States on Russia with the aim of limiting its oil exports to India and China, which analysts indicated is a threat that may surround the European economy and push it into stagflation.

As for the major European economies, the German statistics announced a contraction in GDP by 0.2%, making it the second consecutive year in which the economy has declined. It is still suffering from a cost-of-living crisis and a decline in demand for exports.

The British economy was also awaiting inflation data, which contradicted expectations on an annual basis and recorded slightly less than expectations on a monthly basis, while recording a GDP in the positive zone.     

As for the European inflation index for December, it rose for the third consecutive month to levels of 2.4% as expected on an annual basis from 2.2%, with the rise in service prices being behind this rise, compared to the decline witnessed by food prices.

Third. Japanese Economy:

The Japanese economy will wait for the first meeting of its central bank to make its decision on interest rates, and according to sources familiar with the thinking of bank officials, the bank is expected to raise interest rates next week unless there are any shocks in the market due to President Donald Trump taking office. Despite this news, the governor of the Japanese central bank did not provide any confirmed expectations about the pace of raising interest rates in the future, but he was content to talk about his openness to this idea to save the economy and the currency from sliding, which will make everyone anticipate the governor’s talk about the future of interest rates and how far they can go, after some analysts said that there is a possibility that interest rates on the Japanese yen will reach their highest levels since 2008 when they were around 0.5%.

Fourth. Chinese Economy:

China’s economy kicked off last week with import data for December, which rebounded in part as factories rushed to stock up overseas as they braced for increased trade risks under Donald Trump.

However, the big news for the Chinese economy came at the end of the week, specifically the GDP data, which met the government’s 5% growth target last year, when it recorded 5.4%.

Other industrial indicators also posted positive performances, thanks to the stimulus packages that were launched in September of last year.

However, analysts still see the Chinese economy as having to solve its economic problems related to the real estate sectors, and prove that it can deal with the upcoming tariffs in a way that does not harm the economy.

As for the important Chinese measures taken last week, the most important was the announcement by the Chinese Ministry of Commerce on Tuesday and Wednesday, adding American companies to the list of unreliable entities for their involvement in arms sales to Taiwan, which China considers part of its territory.

Economy Spotlight. What to expect next week:

Financial Markets. What to Expect Next Week:

Global markets will be awaiting the following economic data: