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Daily market analysis

Week ahead: Markets focus on US core PCE price index

March 25, 2024

As we approach the end of March 2024, the world’s economic eyes are set on key indicators that are poised to shed light on the health and direction of major economies, including Australia, Canada, and the United States. These indicators, ranging from consumer prices and GDP growth to housing market dynamics and core inflation rates, are critical barometers for financial markets and policy decision-making. Here’s a brief overview of what’s expected in the coming days.

Australia’s Consumer Price Index Holds Steady

On the Australian front, the Consumer Price Index (CPI), a measure of inflation reflecting the annual price change of goods and services, remained stable at 3.4% in the year to January 2024, mirroring the figure from the previous month. This steadiness suggests a consistent economic environment down under. However, eyes are now on the upcoming CPI release for February 2024, anticipated on 27 March, with analysts forecasting a slight uptick to 3.6%. Such an increase, if realized, could signal mounting inflationary pressures within the Australian economy.

Canada’s Economic Growth: A Subtle Uptick Expected

Moving to Canada, the Gross Domestic Product (GDP), the broadest measure of economic activity, showed no growth in December, falling short of the preliminary estimates that had predicted a 0.3% advance. This stagnation has placed increased importance on the upcoming January 2024 GDP figures, expected to be disclosed on 28 March 2024. Analysts remain optimistic, projecting a modest growth of 0.2%, which could mark a turnaround for the Canadian economy if achieved.

U.S. Economic Performance and Housing Market Dynamics

In the United States, the final GDP numbers for Q4 2023 revealed a 3.2% annualized growth rate, slightly below the advance estimate of 3.3% but following a robust 4.9% growth rate in Q3. The focus now shifts to the first quarter of 2024, with the GDP figures due on 28 March 2024. Analysts are aligning their forecasts with the previous quarter’s performance, expecting a 3.2% growth rate.

Simultaneously, the U.S. housing market seems to be experiencing turbulence. January 2024 saw a significant 4.9% drop in pending home sales, marking the largest decline since August 2023. The forecast for February, however, suggests a potential rebound, with a 1.5% increase in pending home sales anticipated when the data is released on 28 March 2024.

Core Inflation in the U.S.: A Close Watch

Lastly, the U.S. core Personal Consumption Expenditures (PCE) price index, which excludes volatile food and energy prices and is closely watched by the Federal Reserve, increased by 0.4% from the previous month in January 2024. This uptick was the most significant since February 2023. The upcoming release on 29 March 2024, for February’s figures, is predicted to show a slightly lower growth rate of 0.3%. This slight deceleration could signal easing inflationary pressures, a development likely to be closely scrutinized by policymakers and investors alike.

As we await these economic indicators, their collective outcomes will not only reflect the current state of affairs but also hint at the global economic trajectory for the months ahead.

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