The Week Ahead: US 4Q2022 GDP in focus amid Lunar New Year holidays

This article first appeared in The Edge Malaysia Weekly, on January 23, 2023 - January 29, 2023.
The Week Ahead: US 4Q2022 GDP in focus amid Lunar New Year holidays
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It will be a quiet week at home and in most of Asia-Pacific because of the Lunar New Year holidays. Hence, the key focus will be the US gross domestic product (GDP) data for the final quarter of 2022, which will be out on Thursday.

Markets in Malaysia, Singapore and South Korea will be closed on Monday and Tuesday, while those in China and Taiwan will be closed for the whole week. Hong Kong’s will be closed until Wednesday, Vietnam’s until Thursday and Indonesia’s only on Monday.

At home, the ongoing 1Malaysia Development Bhd (1MDB)-Tanore trial, in which former premier Datuk Seri Najib Razak is facing 25 graft charges — four for abuse of power and 21 for money laundering — resumes on Jan 27.

Apart from the US, the Philippines and South Korea will also release their 4Q2022 GDP data on Thursday.

UOB Global Economics & Markets Research estimates full-year growth of 1.5% for the US in 2022, down from 5.9% in 2021. It sees South Korea’s 4Q GDP growing at 1.6% year on year (y-o-y), compared with 3.1% in 3Q2022, and the Philippines’ 4Q growth at 6.5%, compared with 7.6% in 3Q.

The Bank of Thailand (BoT) has a mone­tary policy decision on Wednesday.

“We expect that the BoT may soon reach the peak of its current rate-hiking cycle, with our forecast of another 25-basis point rate hike at the Jan 25 monetary policy committee (MPC) meeting to 1.5% and then for another final 25bps hike to 1.75% at its scheduled March 29 MPC meeting.

“Overall, despite its 1.75% terminal rate, we expect negative real interest rates will continue to [favour] Thailand’s economic recovery,” UOB says in its weekly outlook report last Friday.

According to a Bloomberg poll, five other analysts have also predicted a 25bps hike to 1.5%, while one lone analyst expects a pause.

Meanwhile, December trade data for Thailand will be released on Jan 24, and that of Hong Kong’s and the Philippines’ will be on Jan 26.

Across the Causeway, December Consumer Price Index (CPI) data will be released on Jan 25 while industrial production data for the same period will be released the next day. Singapore’s final 4Q2022 Urban Redevelopment Authority private home price data will be out on Jan 27.

Australia will release CPI data for December and the fourth quarter of 2022 on Jan 25. Bloomberg expects it to come in at 7.7% for December and 7.5% for 4Q2022.

Meanwhile, January flash Purchasing Managers’ Index (PMI) data from major developed economies will be unveiled over the week for the earliest indications of economic conditions at the start of 2023.

“In Asia-Pacific, December’s PMI showed signs of business confidence lifting on the back of looser Covid-19 restrictions in mainland China. January’s surveys will be eagerly scoured for signs of actual business activity being buoyed in the region by China’s policy shift,” S&P Global says.

“Despite rounding off the weakest growth in decades at 3% in 2022, China’s 2.9% y-o-y GDP growth in 4Q beat expectations owing to an earlier-than-expected recovery of demand. December retail sales and industrial output also outperformed expectations, consistent with indications from the Caixin PMIs.

“The flash PMI data for January will be highly anticipated for indications of recession risks and price trends at the start of the year. The US PMI data will be especially interesting to watch, with recent data having shown a steep cooling in the rate of economic growth,” it says.

In the US, apart from the GDP, the market will also be looking out for the latest data on initial jobless claims and new home sales on Jan 26, and Personal Consumption Expenditure inflation on Jan 27.

Note that the US Federal Reserve would have entered its Federal Open Market Committee meeting blackout period last Saturday (Jan 21) until after the next FOMC decision on Jan 31/Feb 1.

Meanwhile, the Bank of Canada (BoC) will make a monetary policy decision on Jan 25. According to a Jan 20 Bloom­berg survey, 16 of 21 analysts polled expect the BoC to hike the interest rate by 25bps to 4.5%, while five analysts anticipate that the central bank would keep its policy rate unchanged at 4.25%.

“The Bank of Canada meeting is widely viewed as a ‘live’ meeting with uncertainty over further increases to the overnight policy rate as the central bank balances the extent to which it would need to tighten monetary conditions,” S&P Global says.

Separately, several European Central Bank officials, including ECB president Christine Lagarde and ECB governing council members Fabio Panetta, Robert Holzmann and Klaas Knot will speak at public forums on Jan 23.

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