Take Two: US and China inflation rises; Eurozone GDP growth slows
- 17 February 2025 (3 min read)
What do you need to know?
US annual inflation unexpectedly rose to 3.0% in January - a seven-month high and up slightly from December’s 2.9%, with oil and food prices chiefly driving the gains. Core inflation, which excludes more volatile food and energy prices, increased to 3.3% from 3.2%. Federal Reserve (Fed) Chair, Jerome Powell, reiterated that the central bank was in no hurry to ease interest rates further, a message consistent with his January press conference, which appeared to rule out a March cut. We expect the Fed will keep rates on hold in 2025, before cutting by 100 basis points by the end of 2026.
Around the world
The Eurozone economy expanded by 0.1% in the final three months of 2024, compared to the previous quarter, an official second estimate showed – a slowdown from the third quarter’s (Q3) 0.4% but better than the zero growth originally reported. The data reflected a contraction in both Germany and France, which shrank -0.2% and -0.1% respectively – both countries have experienced political upheaval in recent months, with Germany’s governing coalition collapsing in November and the country facing elections this Sunday. Elsewhere, the UK economy unexpectedly grew by 0.1% in Q4 – markets had forecast a 0.1% contraction – following zero growth in Q3.
Figure in focus: 0.5%
China’s consumer inflation rate hit its fastest pace in five months in January, bolstered by spending over the Lunar New Year, China’s primary holiday period. Official data showed the consumer prices index rose 0.5% from a year earlier, compared to a 0.1% rise in December. The update reflected higher food prices, the central bank’s economic stimulus measures, as well as the seasonal impact of the Lunar New Year being in January this year – as prices tend to rise as Chinese consumers spend more on travel, leisure and food. The news will be welcomed as China endures a slowdown in consumer spending, a property market crisis and now a renewed trade war with the US.
Words of wisdom
Artificial Intelligence Action Summit: A two-day event focusing on innovation and sustainable use of artificial intelligence (AI) that brought together nearly 100 countries and over 1,000 private sector and civil society representatives in Paris last week. It saw the launch of Current AI, a $400m public-private initiative to develop AI projects that serve the public interest. The summit’s co-chair, French President Emmanuel Macron, also announced Europe would ease back on AI regulation to boost innovation. However, hopes of an international AI agreement were dashed after some countries, including the US and UK, did not agree to sign, citing regulatory and security reasons.
What's coming up?
On Monday, a preliminary estimate for Japan’s Q4 GDP growth is issued. The Japanese economy expanded by 1.2% (annualised) in Q3, down from the previous quarter’s 2.2%. The Reserve Bank of Australia holds its monetary policy meeting on Tuesday – at its last gathering, it held its cash rate at 4.35%. The UK updates markets with its latest inflation numbers on Wednesday, when the Fed also publishes its latest policy meeting minutes. On Friday, Japan issues its own inflation update while composite Purchasing Managers’ Indices - which account for services and manufacturing – covering Japan, the Eurozone, UK and US, are reported.
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