Key Data Could Spring Surprises in the First Week of New Year: What to Watch
The first week of 2024 will be a big one, with a lot of data that will either justify the market rally and expectations for rate cuts or not.
Data that comes in too hot will kill the idea of rate cuts starting as soon as March, and data that comes in too cold will kill the idea of a soft landing. It means Goldilocks must return from her Christmas trip to Aruba and appear this week.
For December, the ISM manufacturing index is expected to rise to 47.1 from 46.7, while the service index falls to 52.5 from 52.7. ADP is expected to show 113,000 new jobs were created in December versus 103,000 in November.
Finally, the official BLS job report predicts 163,000 new jobs will have been made, down from 199,000 in November.
Overall, these numbers are consistent with their prior trends and suggest no significant change in economic growth. The Atlanta Fed GDPNow model indicates that the fourth quarter is growing by a 2.4% seasonally adjusted annualized rate.
At least, based on the estimates, there doesn’t seem to be enough to support rate cuts any time shortly. If it comes in as expected, I think that data is probably enough to turn higher the recent decline in rates and tighten financial conditions.
By most standards, financial conditions have eased so much that the easing could have already substituted for rate cuts.
In fact, over the last two months, the GS financial conditions index has reduced by its most ever. One could argue this could have a stimulative effect on the US economy as we move forward.
On top of this, we have started to see shipping rates rising, as noted by the WCI Composite Container Freight Benchmark, which has increased from 1381 on November 30 to 1660 on December 21.
It will be interesting to see if the
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