Week Ahead Economic Preview: Week Of 31 January 2022

 | Jan 28, 2022 10:17

h2 January global PMIs, US jobs data, BOE and ECB meetings

Worldwide manufacturing and services PMIs will be released in a busy week ahead filled with key economic data such as the US jobs report and eurozone GDP and inflation. Central bank meetings in the UK and eurozone will also unfold. All of this happens while a large part of Asia, including China, will be away for Lunar New Year holidays.

Global markets are being rattled by mounting concerns over inflation and the US Federal Reserve's increasingly hawkish stance. The January US jobs report will therefore be eyed for further clues as to the recent strength of the labour market, which the Fed alluded to in its latest Federal Open Market Committee (FOMC) statement. According to flash PMI data, US firms continued to hire at a solid clip in January, with many reporting rising staff costs amid labour shortages.

The final worldwide PMI survey data will be therefore also be watched for further clues on the growth, supply chain and price outlook after flash PMIs alluded to slowing developed world growth at the start of 2022 as the Omicron wave hit. How the latest Omicron wave has affected the supply chain, notably in Asia, and if global price pressures continued to ease from December 2021 will be in focus.

In Europe, the ECB and BOE hold monetary policy meetings. While the ECB is expected to remain on hold, the market will be looking closely for signs that the mood could be turning more hawkish. Markets are meanwhile pricing in another hike from the UK central bank following the December surprise hike to 0.25%.

h2 The Great Supply Chain Disruption/h2

Supply chains used to be something that only supply chain managers talked about. Now they are of deep concern to everyone from consumers waiting for their deliveries to retailers, major manufacturers, prime ministers and presidents, and of course central banks.

The highly synchronized global supply chain system developed over the past 30 years is under strain like never before and resolving the disruption will be less a "sprint" and more of a "marathon" that runs well into 2022. This is the first major disjunction in the highly-integrated supply chain system that has developed over the last three decades of globalization. The intense new debate on inflation adds to the urgency to understand what is ahead for supply chains in 2022.

"What is unfolding in supply chains globally is not only disruptive, it is also historic," says Daniel Yergin*, vice chairman, IHS Markit and editor of a new report from IHS Markit entitled The Great Supply Chain Disruption: Why it Continues in 2022.

While COVID-19 has been a significant factor in driving the disruptions—with the current Omicron variant creating new uncertainties—it is not the only factor, the report says. Substantial capacity, logistical and labour challenges also exist beyond the pandemic.

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The report includes key insights and observations from IHS Markit experts on manufacturing, shipping and logistics, automotive, oil, agriculture, labour and materials, as well as ESG and geopolitical strains.