by Kim | Mar 16, 2026
The key events for the w/c 16 March 2026: Central Bank meetings: RBA, BoC, FOMC, BoJ, SNB, BoE, and ECB; US PPI; Aus Labour market; Canada CPI
Macro Recap: The Threat of a Persistent Conflict
Geopolitical Risks
The conflict in the Middle East and the resulting closure of the Strait of Hormuz remain the primary drivers of sentiment. The drift back up in oil prices through the end of last week suggests “conflict duration risk” remains a primary concern. If the conflict becomes more entrenched (and the Strait remains closed), the structural threat to global energy distribution and production may become harder for markets to “look through.” The current uncertainty over the duration of this conflict presents a difficult trade-off for key central bank meetings this week: the longer the conflict lasts, the greater the risk that elevated energy prices un-anchor inflation expectations, squeeze real incomes, and weigh on global growth.
U.S. Macro: A Slower Starting Block
Last week, the US GDP revision for Q4 suggested that growth in 2025 ended on a softer-than-expected note. However, growth was expected to slow in Q4 (despite the much higher tracking of growth ahead of official results), due to the effects of the US government shutdown. The “second estimate” of US GDP growth in Q4 was revised notably lower from 1.4% to 0.7% annualized. While most areas of expenditure contributed to the growth downgrade in Q4, the largest contributions were from personal spending and net exports. Overall in Q4, the largest contributors to the slowdown in growth in Q4 versus Q3 were from slower personal consumption expenditure growth, a contraction in net exports, and the decline in government expenditure.
US Q1 Momentum and the Consumer
Looking ahead, the Atlanta Fed’s GDP Nowcast for Q1 2026 growth remains at a resilient +2.7%. However, momentum cooled following last week’s data releases. While a negative Feb labor report weighed on personal spending estimates, this was partially offset by constructive data in housing starts and existing home sales. Personal income growth strengthened in Jan, but growth in real spending remained low. This suggests that softer personal consumption growth has so far persisted into the current quarter, just as higher energy prices threaten a further squeeze on real incomes.
The Inflation Baseline
Importantly for the outlook, the Fed’s preferred PCE inflation data provided a mixed baseline. Headline inflation edged lower to +2.8% over the year, but core PCE ticked up to 3.1% in Jan. Both headline and core PCE inflation are higher than a year ago – reflecting a stickier inflation profile leading into a period of potentially higher energy prices. While the firming trend in core goods and core services inflation remains a concern, the median and the trimmed mean, to a lesser extent, suggest that underlying price pressures likely did not broaden out this month. The more current CPI report for Feb came in as expected, remaining lower at +2.4% for headline and +2.5% for core, and the upcoming PPI for Feb this week will help gauge the read-through to the Feb PCE result.
Outlook for the week ahead: Central Bank meetings: RBA, BoC, FOMC, BoJ, SNB, BoE, and ECB; US PPI; Aus Labour market; Canada CPI
The week ahead is defined by an unusual calendar alignment among central bank meetings, with at least seven key institutions scheduled to meet. These banks are facing elevated uncertainty over the duration of the current conflict and its subsequent impact on energy prices and inflation. Consequently, policymakers will need to reconcile these global pressures with their respective domestic policy nuances as they navigate yet another shock in this cycle of elevated uncertainty.
There will also be several key data releases, and markets are likely to remain firmly focused on the conflict and energy markets. Headline risks remain elevated in both directions.
Key factors & events to watch this week:
Central Bank Meetings
Most central banks are expected to stay on hold in a “wait-and-see” approach for now, due to uncertainty over the duration and scope of the conflict and its resulting impact on energy prices and inflation. Many markets were expecting policy easing through the remainder of the year; however, policymakers will be cognizant of the shift in market pricing for the path of ST rates – in some cases, shifting toward the prospect of hikes this year, as the risk of a prolonged conflict could see higher energy prices derail inflation progress. For most central banks, it will be too early to tell. However, signalling their commitment to inflation mandates may be an important part of central bank decisions this week to keep inflation expectations anchored amid the uncertainty. We will continue to track the signalling by central banks on the outlook and for shifts in guidance.
RBA
- Not all central banks are expected to stay on hold. The RBA will be first cab off the rank this week, and markets are expecting the chance of another hike (back-to-back), taking the cash rate from 3.85% to 4.1%.
- Inflation was (already) the immediate policy risk at its meeting in Feb leading the RBA to hike rates by 25bps.
- Guidance had been suspended at the last meeting in Feb due to the uncertainty over the persistence of domestic inflation pressures.
BoC
- The BoC is expected to stay on hold. The Bank is expected to remain cautious over inflation pressures as the economy adjusts through this period of ‘structural change’.
- Similarly, given the uncertainty facing the Canadian economy over the impacts from tariffs and especially the upcoming renegotiation of the USMCA, guidance had been suspended at the last meeting to provide the Bank with maximum optionality.
FOMC
- The FOMC is expected to stay on hold at this meeting. Market pricing for the path of rates has shifted notably in the last two weeks, now pricing in one cut through the next year.
- The FOMC faces a challenge over balancing its dual mandate – with PCE inflation remaining stickier, and concerns over the labor market rising after the Feb labor report.
- Fed communication will be in focus.
- Updated projections (SEP) will be released at this meeting, and the path of rates and the shift in the projections for growth, inflation, and unemployment will be important signalling.
- Changes to dissents will show how aligned members are – there were two last time.
- The press conference will enable Chair Powell to expand on how they are thinking about this latest shock, and he’ll have to walk a fine line about ‘looking through’ another inflation shock.
BoJ
- The BoJ is expected to stay on hold at this meeting.
- Bank communication will be important for the outlook for hikes – prior guidance was signalling an expectation for further hikes, and markets are still (potentially) expecting a hike in Apr.
BoE
- The BoE is now also expected to stay on hold, shifting from an expectation for a cut at this meeting.
- Recent data continues to reflect easing in growth and labour market conditions, while inflation, although still elevated, has continued to ease. At the last meeting, the BoE noted that “the risk of greater inflation persistence is now less pronounced”. At the same time, concerns emerged over slower inflation risks from weakening demand and a looser labour market.
- The decision to stay on hold, and any changes to the inflation outlook, will need to be reconciled with the prior guidance that “Bank Rate is likely to be reduced further”.
ECB
- The ECB is also expected to stay on hold at this meeting.
- Guidance is unlikely to be changed from the current ‘meeting by meeting’ approach – although the timeframe for the outlook is likely to be shortened, given the elevated uncertainty over energy prices, especially for Europe.
Geopolitical Risks
Geopolitical risks are expected to remain elevated as markets grapple with the uncertain trajectory and scope of the conflict.
Global Data
- US: headline PPI for Feb is expected to slow to +0.3% over the month in Feb (from +0.5% in Jan), and increase to +3% over the year (from +2.8% in Jan). Core PPI is expected to slow to +0.3% over the month in Feb (from +0.8% in Jan), but also accelerate to +3.7% in Feb (from +3.6% in Jan).
- Canada: CPI for Feb is expected to firm over the month for headline inflation (+0.7% in Feb from 0% in Jan) and remain little changed at around +2.3% over the year. The median inflation rate is expected to continue easing to +2.4% in Feb from +2.5% in Jan.
- Australia: Labour Market Survey for Feb is expected to remain fairly stable with +20k employment growth in Feb (up from +17k in Jan) while the unemployment rate ticks slightly higher to 4.2% (from 4.1% in Jan).
This week, the US Treasury will auction and settle approx $679bn in ST Bills, Notes, and Bonds, raising approx. $96bn in new money. Approx $26bn in ST Bills will mature on the Fed balance sheet and will be reinvested. The US Treasury will also auction the 10-year TIPS and 20-year Bond this week – both to settle at the end of the month.
More detail (including a calendar of key data releases) is provided in the briefing document – download the pdf below:
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Mar 9, 2026
The key events for the w/c 9 March 2026: US CPI (Feb) & PCE Inflation (Jan), Geopolitical Risks
Macro Recap: From Escalation to Shock
Through last week, markets continued to recalibrate the assessment of the Middle East conflict as hopes for a swift de-escalation faded. The situation has transitioned into a broader and potentially more sustained engagement, shifting investor focus from temporary volatility toward the structural risks of a genuine energy price shock – driven by the threat of prolonged production curbs and disruptions to global distribution. With no clear “off-ramp” currently visible (though one remains a strategic possibility), concern is firming over the capacity of an emerging price-shock to de-anchor global inflation expectations, while dealing a blow to global growth.
The FOMC Dilemma: Balancing a Cooling Labor Market
An energy price shock has arrived at a complex moment for the U.S. economy. Last week’s payrolls report for Feb provided a stark counter to the stronger job creation reflected in the Jan report, adding to fears of a weakening labor market. In Feb, payroll jobs fell by -92k jobs, which was well below expectations for a +58k increase. The prior two months were also revised lower by -69k jobs; however, the stronger increase in Jan was mostly preserved at +126k after revisions (from +130k). Although the unemployment rate ticked up slightly to 4.4%, the data casts doubt on whether the labor market is “stabilizing” or beginning to trend lower.
The FOMC could face a policy dilemma if there is no meaningful de-escalation in the conflict over the coming week. This dilemma centres on the trade-off between its dual mandate risks: assessing the degree to which it can ‘look through’ an energy-led inflation spike to support a cooling labor market or whether it needs to adopt a more hawkish stance to keep inflation expectations anchored. As of Monday morning, 9 Mar 2026, following a weekend of escalating tensions, markets are now considering the potential for a “stagflationary” mix of rising costs and falling employment. At its meeting next week, the Fed’s messaging will be important in signaling which side of its dual mandate carries the greater weight. This assessment will depend on how the conflict and markets evolve over the coming week.
Outlook for the week ahead: US CPI (Feb) & PCE Inflation (Jan)
Market reaction to the unfolding conflict with Iran will remain at the forefront this week. Let’s hope there is a meaningful de-escalation (or, better yet, steps towards a resolution) this week. Both positive and negative headline risks abound.
From a data perspective, US data will be in focus with a mix of inflation and key inputs for the growth backdrop. It’s also the blackout period ahead of the FOMC meeting next week.
Key factors & events to watch this week:
Geopolitical Risks
Geopolitical risks remain elevated as markets grapple with the uncertain trajectory and broadening scope of the conflict.
US inflation data – CPI & PCE
There will be several inflation reports this week, continuing to catch up after the government shutdown last year and from the brief partial shutdown earlier this year. While the inflation reports may seem redundant in the face of >$100 oil, the reports will still be important for providing context ahead of the FOMC next week.
US CPI for Feb
- Headline CPI is expected to increase by +0.2% over the month in Feb (unchanged from +0.2% in Jan), while annual headline CPI is expected to increase to +2.5% in Feb, from +2.4% in Jan.
- Core CPI is expected to increase by +0.2% over the month in Feb, down from +0.3% in Jan. Core CPI is expected to increase by +2.5% over the year in Feb (also unchanged from +2.5% in Jan).
US PCE Price Index for Jan
- Headline PCE inflation for Jan is expected to increase by +0.3% in Jan (from +0.4% in Dec). Headline PCE inflation is expected to be unchanged at +2.9% over the year in Jan.
- Core PCE inflation for Jan is expected to remain firm at +0.4% over the month, while annual core PCE inflation is expected to increase to +3.1% in Jan.
US Growth Inputs
After last week’s ISM, retail sales, and labor market data, the US growth run-rate tracked by the Atlanta Fed GDP nowcast slowed from +3% to +2.1% so far in Q1. This week, personal spending, income, durable goods orders, and housing data will help to update the broader growth backdrop.
- Growth in US personal spending is expected to be little changed in Jan from +0.4% in Dec.
- Personal income growth is expected to increase by +0.4% in Jan, up from +0.3% in Dec.
- Durable goods orders are expected to increase by +1.2% in Jan, after +1.4% in Dec.
- The second estimate for US GDP in Q4 2025 is expected to remain at +1.4% annualized.
- US building permits are expected to edge lower in Jan to a 1.41m annualized pace (from 1.455m in Dec).
- Housing starts are expected to slow to a 1.34m annualized pace in Jan, from 1.404m in Dec.
US labor market
There will be several data points this week to help round out the labor market view.
- The Conference Board Employment Trends Index for Feb is expected to fall from the 105.06 level recorded in Jan.
- The JOLTS report for Jan is expected to show a small rebound in Job Openings to 6.8m in Jan, from 6.5m in Dec.
Global Data
- Canada: Labor market survey for Feb ahead of its meeting next week, also on 18 Mar. Employment growth is expected to rebound from -24k to +9k; however, the unemployment rate is expected to edge higher to 6.6% in Feb, from 6.5% in Jan.
This week, the US Treasury will auction and settle approx $525bn in ST Bills, raising approx. $26bn in new money. Approx $15.4bn in ST Bills will mature on the Fed balance sheet and will be reinvested.
More detail (including a calendar of key data releases) is provided in the briefing document – download the pdf below:
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Mar 2, 2026
The key events for the w/c 2 March 2026: US: payrolls Feb, retail sales, ISM surveys, & Fed Beige Book, Aus GDP Q4, S&P Global PMIs Feb
Macro Recap: Escalation
Events over the past week reinforced the economic and geopolitical crosscurrents facing markets right now. While we noted that broader uncertainty was being shaped by trade policy upheaval and structural technological change, the weekend’s developments have seen heightened geopolitical risk move to the forefront. Beyond the headlines in Washington and the Middle East, the economic backdrop remains caught between “signal and noise” while market sentiment continues to grapple with the structural implications of AI and the continued uncertainty over trade policy.
Geopolitical Risks Shift from Ultimatum to Action
With the transition to active engagement marking a new phase in regional tensions, focus has shifted to the immediate energy and security implications. Markets will need to assess the risk of a prolonged disruption against the possibility of Iran returning to talks with US President Trump (Bloomberg). US and Iranian envoys are expected to continue talks this week on the sidelines of the IAEA Board of Governors meeting in Vienna – in other words, the diplomatic window remains open.
The US Domestic Outlook: Trade Uncertainty and the Economy
Amid the geopolitical tension, several factors are clouding the view of the US domestic outlook. Firstly, US trade policy remains in a state of flux following the successful challenge to emergency tariff powers. For now, the administration’s pivot to a temporary 15% blanket tariff has left businesses navigating an unsettled regulatory landscape.
This policy uncertainty adds a layer of complexity to the broader economic question currently facing the Fed: is the U.S. labor market beginning to stabilize, or was the strength in Jan just “noise”? Last week, Gov Waller was cautious over the Jan labor market ‘signal’ of a stronger labor market (given low hiring, weak JOLTS, narrow payroll breadth, likelihood of downward revisions to Jan data), highlighting the risk of ‘noisy’ data. Gov Waller dissented at the last FOMC meeting, preferring another rate cut – due to still elevated risks of a ‘substantial’ downturn in the labor market, combined with a ‘limited’ risk of higher inflation. His latest assessment still sees this balance. The US labor market data this week will be crucial to whether he’ll shift his outlook; if this week’s Feb report confirms the Jan labor market strength, then he could be more comfortable with a hold in March. However, he said that he could support further cuts even if the labor market improves, due to what he has described in the past as “good news” rate cuts, if inflation continues to make progress toward the 2% target.
Last week, US PPI data for Jan was firmer than expected, but remained below a year ago. While the headline monthly rate increased by more than expected to +0.5% in Jan (from +0.4%), the annual rate fell to +2.8% (from +3% in Dec). Food and energy producer prices were notably lower this month, helping to offset firmer core goods and services producer prices. Core PPI increased by +0.8% over the month, up from +0.6% in Dec. While annual core PPI continued its recent acceleration to +3.6% in Jan (from +3.3% in Dec), it remains below a year ago. Most important is how some of the PPI prices ‘map’ into the Fed-preferred PCE inflation measure. For now, the Cleveland Fed PCE nowcast for Jan (as of 27/2) remains somewhat subdued, with headline PCE at +0.2% over the month in Jan and core PCE rising by +0.27% over the month in Jan. Both estimates are below Dec and below (or just below) the monthly PCE rates in Jan a year ago.
Australia CPI: Headline vs. Underlying Divergence
Aus CPI continued to firm as headline CPI increased to +3.8% in Jan (from +3.7% in Dec), while the monthly pace also increased to +0.5% in Jan (from +0.2% in Dec). Both measures of core inflation (trimmed mean and median) edged higher over the year to +3.4% and +3.6%, respectively. However, the median and trimmed mean inflation rates are now below the headline (SA) rate. So while the headline inflation rate has increased over the last several months, underlying inflation, while still elevated, has not worsened to the same degree, suggesting that the increase in the headline rate has likely been influenced by outlier effects rather than a further broadening of inflation pressures. However, inflation through the centre of the distribution remains persistent. Over the week, market expectations for further rate hikes remained little changed.
Outlook for the week ahead
While markets will continue to assess the unfolding conflict in Iran, it will be a busy week of important US data.
The key focus this week is US labor market data including non-farm payroll growth for Feb. This will be an important release to assess whether the Jan strength was a genuine “signal” of a labor market on firmer footing or merely statistical noise.
Beyond the labor market, several key indicators will provide an early read on Q1 momentum: the Feb ISM surveys, the Jan retail sales report, and the release of the Fed’s Beige Book ahead of its meeting in the middle of this month.
Key factors & events to watch this week:
Geopolitical Risks
- Iran: Now that military action has commenced, uncertainty over the outlook and scope of this conflict remains elevated. Early reporting indicated that US President Trump was “open to dropping sanctions on Iran if its new leader was “pragmatic”. Iran also made a fresh push to resume talks with the US, the Wall Street Journal reported” (source: Bloomberg).
US Labor Market Data – Feb
The broad suite of US labor market data will be released this week, providing the Fed with a comprehensive update on labor market conditions.
- Non-farm payrolls are expected to increase by 58k in Feb, a notable step down from +130k in Jan, but still above the weaker trajectory through to the end of 2025. The direction of revisions to the Jan growth will also be important.
- Early in the week, the ADP employment change is expected to increase by +49k, up from +22k in Jan.
- The unemployment rate is expected to stay unchanged at 4.3%, while the participation rate is also expected to be little changed.
- Average weekly hours are expected to be unchanged at 34.3 hours/week.
- Average weekly earnings are expected to slow to +0.3% over the month (from +0.4% in Jan).
- The Challenger Job Cut Announcements survey will also remain in focus after the notable increase in Jan to 108k announcements, while hiring announcements had remained subdued.
- The JOLTS report for Jan is due out on 13 Mar 2026.
- The non-farm productivity for Q4 is expected to increase by +1.7% in Q4, down from +4.9% in Q3. Unit labor costs for Q4 are expected to increase by +2.1% after falling by 1.9% in Q3.
- Initial claims are expected to remain lower at 215k in the wk ended 28 Feb (from 212k in the prior week).
US growth momentum for Q1
The employment, ISM, and retail trade data will provide an early update for the Atlanta Fed GDP nowcast for Q1. The current nowcast (based on limited data) shows the US GDP growth run rate at +3%.
- The ISM PMIs for Feb are expected to move somewhat lower for manufacturing to 51.7, while the ISM services PMI is expected to be little changed at 53.5.
- Retail sales for Jan are expected to fall by -0.3% after a flat result in Dec. The retail control measure, which feeds into the GDP calculation, will be important, and fell marginally in Dec by -0.1%.
Fed speeches & data
- The latest Fed Beige Book will be released this week and will provide an anecdotal update on changes in activity over the last six weeks. This is usually an important input into the FOMC meeting. Fed speeches will be limited this week.
Global Data
- Australia: Q4 GDP is expected to increase by +0.7%, up from +0.4% in Q3. Annual growth is expected to be unchanged at +2.1%.
- Euro area CPI (prelim) for Feb is expected to be unchanged at +1.7% for headline CPI and +2.2% for core CPI.
- The full suite of S&P Global PMIs for Feb will be released through the early part of the week.
More detail (including a calendar of key data releases) is provided in the briefing document – download the pdf below:
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Feb 23, 2026
The key events for the w/c 23 February 2026: US tariff ruling fallout, State of the Union, earnings, data (PPI), and geopolitical headline risks.
Outlook for the week ahead
Events in the coming week highlight the macroeconomic and geopolitical crosscurrents facing markets right now. While the U.S. domestic data calendar is relatively light this week, broader uncertainty is being shaped by renewed trade policy upheaval, structural technological change, and heightened geopolitical risk. As markets digest the administration’s latest pivot toward a 15% blanket tariff, President Trump will give the State of the Union address this week, likely addressing trade, tariffs, and the upcoming midterms.
Beyond Washington, market sentiment regarding AI capability is shifting from broad excitement toward a more critical assessment of viability across sectors, placing tech earnings under the spotlight this week. Simultaneously, the geopolitical environment remains one of elevated risk; tensions with Iran have intensified following the US President’s 10-to-15-day ultimatum.
With Fed officials, such as Governor Waller, providing his latest assessment of the US economic outlook, and key data points from Australia, Japan, and Canada filling the gaps, the week ahead is less about new data and more about how these forces might shift or reshape economic expectations for 2026.
Key factors & events to watch this week:
US Trade & Policy: The State of the Union and the Tariff Pivot
- Focus: the weekend announcement of a pivot to a 15% blanket tariff, plus what the Supreme Court ruling will mean for existing or newly negotiated trade deals. This is a fluid situation with many open questions, especially about how the administration will navigate this ruling and what it will mean for the broader economy.
- US President Trump’s State of the Union speech.
Technology: From AI Excitement to Structural Repricing
- Earnings, and especially tech earnings, will be in focus this week (Nvidia).
The Fed & Inflation: Parsing the Last of 2025
- There will be several US Fed speeches, but of note will be Fed Gov Waller on the Economic Outlook – usually an important speech that will provide his updated view of growth, inflation, and labor market risks. Gov Waller was one of two dissents at the last FOMC meeting – preferring a further 25bps cut. Gov Waller will also give another speech later in the week on “Technology”.
- Fed Governor Cook will give a speech on AI and Productivity, and Vice Chair (Supervision) Bowman will provide testimony at the Hearing on Update from the Prudential Regulators.
- US PPI for Jan will be released this week (Fri) – an important catch-up release, providing key inputs for the more up-to-date PCE price index data for Jan. Headline PPI for Jan is expected to slow to +0.3% over the month in Jan (from +0.5% in Dec), while the annual headline rate is expected to slow to +2.6% in Jan (from +3% in Dec). Core PPI is expected to increase by +0.3% over the month in Jan (from +0.7% in Dec), while the annual rate is expected to slow to +3% in Jan (from +3.3% in Dec).
Global Data
- Australia: The new monthly CPI series for Jan is expected to show little change in core measures of CPI. From the prior report, the Dec trimmed mean came in at +3.3% over the year, while the median CPI came in at +3.6% over the year. Inflation remains a key area of concern for the RBA. Aus GDP partials will also be released throughout the week.
- Japan: Tokyo CPI for Feb; the core CPI – ex fresh food is expected to slow to +1.7% over the year in Feb from +2% in Jan.
- Canada: GDP for Q4 will be important ahead of the BoC’s assessment of economic activity. While growth in Q3 had come in higher than expected at +0.6%, there was concern that growth may have stalled through Q4.
Geopolitical Risks
- Iran: Based on the 19 Feb announcement of a 10–15-day deadline for Iran to make a deal on its nuclear program or face possible military action, this is an important week in the lead-up to that deadline.
This week, the US Treasury will auction and settle approx $562bn in ST Bills, FRNs, and 30-Year TIPS, raising approx. $74bn in new money. The US Treasury will also auction the 2-year, 5-year, and 7-year Notes this week – to settle on 2 Mar. Approx $10bn in ST Bills will mature on the Fed balance sheet and will be reinvested.
More detail (including a calendar of key data releases) is provided in the briefing document – download the pdf below:
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Feb 16, 2026
The key events for the w/c 16 February 2026: US PCE inflation, Q4 GDP, & FOMC Minutes, Global CPI data, RBNZ Policy Meeting, S&P Prelim PMIs Feb
Macro Recap: Constructive Data for the Fed Mandate
US data last week provided a solid update to the Federal Reserve’s “balance of risks”. The results reflected a constructive shift on both sides of the mandate: disinflation in the CPI continued, though it is not yet back to the 2% target, while signs of stabilization in the labor market helped to alleviate more immediate concerns over near-term weakness. While these trends remain to be fully confirmed, both metrics moved in the right direction, providing a constructive enough backdrop to keep the Fed on hold. The broader context for Q4 growth did shift lower, as weak retail sales in Dec confirmed a softer spending trajectory to end the year. However, the outlook remains resilient, especially given the Fed’s existing expectation for a shutdown-related disruption to Q4 activity.
US Labor Market: Signs of Stabilizing
The Jan labor report likely aligns with the Fed’s view of signs that the labor market is stabilising. This was seen across several key indicators in Jan:
- Non-farm payrolls increased by a notably higher-than-expected +130k, with only a minor downward revision to the prior month. This marked the largest increase in non-farm payrolls since Dec 2024. The gains were led by the private sector (+172k in Jan), while government payrolls contracted by -42k. While the private hiring trajectory has been more encouraging since the shutdown, the direction of future revisions will be important in determining if this forms an enduring trend.
- After the annual benchmark revisions, the annual growth in private payrolls for 2025 was revised from +733k to +367k, bringing the data in line with the weaker labor market conditions throughout the year.
- The unemployment rate edged lower to 4.3%, despite an increase in participation. This is a welcome undershoot of the latest Fed projection of the year-end unemployment rate of 4.5%.
- Growth in hours & wages supported nominal income growth in Jan. Average weekly earnings growth rebounded in Jan to +0.4% (from a softer 0% in Dec), while aggregate hours worked increased by a solid +0.4% in Jan (after a fall of -0.2% in Dec). Growth in hours aligns with some of the stronger activity (output) reports for Jan.
Retail Sales: Real Spending Slowdown in Q4
While the stabilizing labor market supported the income side of the equation for Jan, the consumption side showed a more cautious, trend-like deceleration in Dec.
- Nominal stalling: Headline nominal retail sales growth stalled in Dec after increasing by +0.6% in Nov. The result was led mostly by a fall in motor vehicle sales and smaller falls in clothing, misc., and foodservice.
- In real terms, sales fell by -0.3% in Dec, after increasing by +0.4% in Nov – which brings the Dec qtr change to -0.2% in real terms, versus +0.6% in the Sept qtr.
- GDP Implications: This softer spending result aligns with the Fed’s expectation of a shutdown-related slowdown. Consequently, the contribution from consumer spending in the Atlanta Fed’s GDPNow forecast for Q4 was reduced, with the overall growth run rate slowing to +3.7% in Q4.
Jan CPI: Downside Surprise Amid Underlying Stickiness
- Headline CPI was lower than expected, slowing to +0.2% over the month in Jan (expecting +0.3%) and slowing to +2.4% over the year in Jan (from +2.7% in Dec). The main contributors to the headline annual deceleration were the fall in gasoline and used car and truck prices.
- Core CPI came in as expected, accelerating to +0.3% over the month (from +0.2% in Dec), while annual core CPI slowed to +2.5% in Jan (from +2.7% in Dec). The fall in used car prices slowed core goods inflation to 0% in the month, which was more than offset by an increase in core services inflation, possibly related to annual corporate price increases.
- Underlying Trends: The relatively higher trimmed mean (+2.7%) and median (+3.0%) inflation rates suggest that underlying pressure remains stickier than the core CPI indicates. In other words, there is still some persistence in underlying inflation through the middle of the distribution. Both measures, however, remain on a clear disinflationary trajectory.
While the larger improvement in CPI since Sept could be related to the restart of the data collection post-shutdown disruption, the broader disinflation trend remains in place. The focus now shifts to how the Fed’s preferred PCE price index evolves; the Dec PCE inflation data due this week is expected to show some firming. For the moment, market expectations for a Jun rate cut remain unchanged (source: CME Fedwatch).
Outlook for the week ahead: US PCE inflation, Q4 GDP, & FOMC Minutes, Global CPI data, RBNZ Policy Meeting, S&P Prelim PMIs
The coming week presents another important slate of US data as we close out the 2025 picture. While Jan’s CPI provided a welcome reprieve, the upcoming Fed-preferred PCE report for Dec is expected to reflect a firmer year-end inflation profile. Personal income and spending data will feed into the Advance Q4 GDP report, which is expected to offer a view of resilient economic activity despite the government shutdown disruption. This combination of sticky inflation and resilient growth data doesn’t necessarily shift the goalposts for the Fed, but it does reinforce the “solid” economic conditions. Rather than signalling a pivot, these prints would likely confirm that the Fed can afford to remain patient, as the lack of a growth “cliff” removes the urgency for aggressive easing. Globally, the focus shifts to Jan CPI reports for the UK, Canada, and Japan, while the Feb prelim S&P PMIs will provide further insight into momentum across key markets at the start of the new year.
Key factors & events to watch this week:
US PCE Inflation (Dec) will be a key report for the Fed and is expected to show inflation remaining firm at the end of 2025.
- Headline PCE inflation is expected to increase by +0.4% in Dec, up from +0.2% in Nov. Over the year, headline inflation is expected to increase to +2.9%, up from +2.8% in Nov.
- Core PCE inflation is expected to increase by +0.3% in Dec, up from +0.2% in Nov. Annual core PCE inflation is expected to increase by +3% in Dec, up from +2.8% in Nov.
- The current FOMC year-end projection for core PCE inflation is +3%.
US growth at year-end 2025
- The advance estimate for Q4 GDP in 2025 is expected to be +2.8% annualized, down from +4.4% in Q4. This would translate into year over year growth of +2.6% at the end of 2025, well above the current Fed projection for year-end growth of +1.7%.
- Personal spending growth for Dec is expected to slow to +0.4% from +0.5% in Nov.
- Personal income growth for Dec is expected to be +0.3% in Dec, unchanged from +0.3% in Nov.
- Durable Goods Orders for Dec are expected to fall by -1.8% after the stronger +5% in Nov.
- Housing data will continue to catch up with Building Permits and Housing Starts for Nov and Dec to be released this week.
FOMC Minutes & Fed speeches
- The minutes of the Fed meeting in Jan will be released this week. At the last meeting, the Fed kept rates on hold while signalling a subtle realignment in the balance of risks to its mandate. Two Committee members dissented.
- There will be several Fed speeches this week – though none so far on the economic outlook.
Global CPI reports (Jan)
- Canada’s CPI for Jan is expected to increase to +0.1% over the month after falling by -0.2% in Dec. Over the year, headline inflation is expected to ease back from +2.4% as the base effects from last year’s GST holiday fall away. BoC measures of core inflation: trimmed mean is expected to continue to moderate to +2.6% in Jan, from +2.7% in Dec, while the median is expected to remain unchanged at +2.5%.
- UK CPI is expected to ease to +3% in Jan, from +3.4% in Dec, while core CPI is expected to continue to ease to +3.1% in Jan, from +3.2% in Dec. The latest BoE inflation forecasts show a faster return to the 2% target.
- Japan’s National Core CPI (ex-fresh food) for Jan is expected to slow to +2% over the year, from +2.4% in Dec. This slowing is in line with BoJ expectations that inflation will slow to below 2% in H1 2026, due to “waning food prices”, while the latest inflation forecasts were upgraded.
Australia – RBA Minutes & Labour Market for Jan
- The minutes of the latest RBA meeting will be released this week, providing some insight into the decision to hike the cash rate by 25bps.
- The Jan labour market survey is expected to show somewhat softer employment growth of +20k this month (from +65k in Dec), and the unemployment rate to edge back up to a still historically low 4.2%. Growth in the Q4 wage price index is expected to be unchanged at +0.8%.
The RBNZ will meet for the first time this year, under the new leadership of Governor Breman. The RBNZ is expected to stay on hold at 2.25%.
Finally, the suite of global prelim S&P PMIs will be released for Feb, providing insight into whether the Jan expansion was maintained.
This week, the US Treasury will auction and settle approx $700bn in ST Bills, Notes, and Bonds, raising approx. $84bn in new money. The US Treasury will also auction the 20-year Bond and 30-year TIPS this week. Approx $50bn in ST Bills, Notes, and Bonds will mature on the Fed balance sheet and will be reinvested.
More detail (including a calendar of key data releases) is provided in the briefing document – download the pdf below:
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
