The Week Ahead: US jobs; Fed minutes; Next results

Here’s our pick of the top economic and company events in the week commencing Monday, 1 January 2024:

US Federal Reserve minutes

Wednesday 3 January: The release of minutes from the US Federal Reserve’s last meeting (12-13 December), at which interest rates were left unchanged at a range of 5.25% to 5.5%, could shed light on policymakers' plans for the year ahead. The market reacted positively to Fed chair Jay Powell’s post-meeting press conference, when he signalled an openness to the idea of rate cuts in 2024 – a somewhat surprising development given the strength of the US economy. He also appeared to call time on the Fed’s "higher for longer" narrative as officials cut their dot plots – their interest rate projections – for the coming year from 5.1% to 4.6%, indicating that they expect at least three rate cuts in 2024. Powell’s willingness to support investors' notion that the Fed is done on rate hikes and is considering rate cuts sent markets higher in the run-up to Christmas. However, some officials, including New York’s John Williams and Atlanta’s Raphael Bostic, have pushed back on expectations of three rate cuts in 2024. In light of all this, the publication of the latest meeting minutes could help establish what was discussed behind closed doors in December. Did Powell mean to come across quite so dovish? Was there any discussion of a rate-cut timeline? These are the key questions that the minutes may help to answer.

Eurozone flash consumer price index (December)

Thursday 4 January: Inflation in the euro area eased to 2.4% in November, down from 2.9% in October, as price growth neared the European Central Bank’s 2% target. Continuing the slowdown in consumer price increases over the last quarter, the December reading could see CPI drop to 2%. If that happens, the ECB may struggle to push back on the sense among investors that officials need to consider a modest rate cut in the coming months as the bloc’s two biggest economies, Germany and France, continue to underperform. The ECB may point to the fact that core price growth is higher at 3.6%, but the ECB’s inflation target is based on headline CPI, not core CPI. The ECB’s monetary policy may soon appear overly tight for the current climate. 

European services purchasing managers' index (December)

Thursday 4 January: The recent flash purchasing managers’ index readings from Germany and France painted a gloomy picture of service sector activity, raising questions over the ECB’s reluctance to consider a rate cut in the near term. Given Germany’s deep-rooted, historical anxiety over inflation, one can perhaps understand German policymakers’ reluctance to consider rate cuts before inflation is brought fully under control. But for other eurozone states, the reticence over rate cuts is somewhat mystifying. The eurozone economy is on its knees, with France and Germany seeing recession-type levels of economic activity. The recent services PMI readings for France and Germany fell to 44.3 and 48.4, respectively, indicating contraction. In contrast, the UK's services PMI reading improved to 52.7, indicating expansion and raising hopes that the British economy might avoid a recession. 

Next Q4 results

Thursday 4 January: After hitting 30-month lows in October 2022, shares of UK retailer Next have risen by more than a third in 2023. In November, the Leicester-headquartered company raised its full-year profit guidance to £885m, up from £875m – the fourth time the estimate has been increased. That came after a 4% uptick in Q3 full-price sales. Guidance on full-year sales growth was also upgraded to 3.1%, versus 2.6% previously. The upcoming Q4 results should reveal whether the business had a good Christmas trading period, maintaining the positive momentum going into the final period of the year.

US non-farm payrolls (December)

Friday 5 January: The US economy added 199,000 jobs in November, a jump from 150,000 in October. Meanwhile, the unemployment rate fell to 3.7% in November, down from 3.9% one month earlier, and the labour force participation rate ticked back up to 62.8% from 62.7%. Annual growth in average hourly earnings remained at 4%, above the rate of inflation, suggesting that the Federal Reserve is unlikely to cut rates in the next couple of months. Weekly jobless claims have fallen to around 212,000. Strong jobs growth in recent months helped fuel US economic growth in Q3, when GDP expanded by 5.2%. For December, economists estimate that the labour market added 165,000 payrolls, with unemployment expected to edge higher to 3.8%. 

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SELECTED COMPANY RESULTS

Note: While we check all dates carefully to ensure that they are correct at the time of writing, company announcements are subject to change.

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