Week Ahead Economic Preview: Week of 21 December 2020

The following is an extract from IHS Markit's latest Week Ahead Economic Preview. For the full report, please click on the 'Download Full Report' link.

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• People's Bank of China policy meeting
• US, UK, Spain and Netherlands third quarter GDP updates, plus US PCE data
• Key indicators for Japan

A curtailed week due to Christmas nevertheless sees some important economic data releases. The week commences with a focus on the People's Bank of China policy rate meeting, with clues sought as to when some of the emergency pandemic support will be unwound. Although the Caixin PMI surveys indicated the strongest rates of economic growth and job creation seen for over a decade in November, policymakers are juggling these encouraging signs against concerns over a strengthening yuan, deflation and credit risks following significant recent defaults in China's USD 4 trillion domestic corporate bond market.

US GDP data are also released during the week, providing more detail on economic trends in the third quarter. Prior data showed the economy having rebounded at an annualised rate of 33.1% in the third quarter, though we are tracking a more modest rate of around 5.6% in the fourth quarter. Updates to durable goods orders, new and existing home sales, consumer sentiment, jobless claims and personal spending and income data will give more insights into the economy's resilience mid-way through the fourth quarter, while PCE price data will be eyed for inflation signals.

In Europe, final third quarter GDP data are likewise released for the UK (currently estimated as showing a 15.5% quarter-on-quarter rebound) and will give more colour on business investment and consumer spending in particular. Public sector borrowing data are meanwhile scheduled to further reveal the ongoing cost of the pandemic. Third quarter GDP numbers are also updated for the Netherlands and Spain.

Brexit developments will also remain firmly in focus, as the UK government strives to seek a trade agreement with the EU before the Brexit transition period ends on 31st December. Sterling has risen sharply on encouraging news that the deal is in sight.

The week closes with a batch of indicators that will provide updated guidance on Japan's economic health in November, including retail sales, inflation, housing starts and the unemployment rate. Like many other countries, Japan's recovery continues to be constrained by falling service sector activity, according to PMI data, but manufacturing is showing signs of stabilising.

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PMI commentary: Chris Williamson

Europe commentary: Ken Wattret

APAC commentary: Rajiv Biswas

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Purchasing Managers' Index™ (PMI™) data are compiled by IHS Markit for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies, and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.

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