Take Two: US inflation rises; China trade surplus nears $1trn
- 20 January 2025 (3 min read)
What do you need to know?
US annual inflation rose for the third consecutive month in December, to 2.9% from 2.7% in November reflecting increased energy prices. Core inflation, which excludes energy and food, edged unexpectedly lower to 3.2% from 3.3% previously. Currently AXA IM expects the Federal Reserve to cut interest rates once more in March, before pausing its easing cycle until the second half of 2026. Elsewhere, Eurozone annual inflation was confirmed at 2.4% in December, up from 2.2% in November. In the UK inflation unexpectedly fell to 2.5% year-on-year in December from 2.6%, while core inflation eased to 3.2% from 3.5%, boosting hopes of an interest rate cut next month.
Around the world
China’s economy grew 5.4% in the fourth quarter (Q4) from a year earlier, the fastest pace in six quarters, lifting GDP growth to 5% for the year - in line with its target. Strong growth in exports helped boost the world’s second-largest economy - China’s annual trade surplus neared a record US$1trn in 2024, as its exports rose ahead of expected US trade tariffs while weak domestic demand held back imports. In December, exports rose 10.7% from a year earlier to $104.8bn, while imports grew 1%, resulting in a $992bn surplus for the year. However, there are concerns that tariffs will reduce exports in future, removing a key driver of China’s economic growth.
Figure in focus: 19 million
Growing digital access is expected to create 19 million jobs by 2030, according to the World Economic Forum’s (WEF) Future of Jobs Report 2025. At the same time, it is expected to replace around nine million roles. The report found that 60% of employers expect broadening digital access to transform their businesses in the next five years, with three key technologies - robotics and automation, energy generation and storage, as well as artificial intelligence and information processing – predicted to have the biggest impact.
Words of wisdom
PFAS - Per- and polyfluoroalkyl substances (PFAS), commonly referred to as ‘forever chemicals’, are human-made chemicals which can take thousands of years to break down. They are used in a wide range of consumer products and industrial processes, from non-stick cookware and waterproof clothing to cleaning products – some studies have linked some PFAS to harmful health effects. A recent report from the Forever Lobbying Project found that the cost of cleaning up pollution from these toxic chemicals could reach more than £1.6trn across the UK and Europe over a 20-year period. Although some types of PFAS have been banned, there are calls for greater regulation on a global scale.
What's coming up?
All eyes will be on the US on Monday as Donald Trump is inaugurated as President, marking the beginning of his second term in office. On the same day the WEF annual meeting begins in Davos, Switzerland. On Tuesday, the Eurozone’s ZEW Economic Sentiment Index is published while Canada reports its latest inflation data, followed by Japan on Friday. The Bank of Japan also meets to decide on monetary policy with a two-day meeting on Thursday/Friday - policymakers chose to hold rates steady at 0.25% in December and AXA IM expects a 0.25% hike at this meeting. In addition, on Friday, flash Purchasing Managers’ Index data is released for the Eurozone, US, UK and Japan.
Disclaimer
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Due to its simplification, this document is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this document is provided based on our state of knowledge at the time of creation of this document. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.
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