The Week Ahead is highlighted by US Economic Data

Diverging central bank policies, contrasting global growth rates, falling oil prices and low inflation will be the overriding themes as 2015 begins. One of the biggest uncertainties of the year could be the FOMC’s normalization path and whether negative growth shocks and low inflation will further delay the long awaited rate liftoff from the Fed. Along with those factors, geopolitics and potential political turmoil are risks that could have significant implications for economic activity and inflationary pressures.

The U.S. economy is ending the year on much better footing than expected, especially after the surprising upward revision to 5.0% for Q3 GDP growth. On the other hand, European and Asian economies have been underperforming. The importance for the Fed as well as other G7 central bankers, is whether the weakness in prices is more a function of the transitory impact of falling energy costs, or whether it is more a function of the slowdown in growth and declining demand. And to complicate outlooks further, the drop in energy prices is likely to be a net positive for consumers, as well as growth.

This week’s data highlight should be the ISM manufacturing index scheduled to be released on Friday. Manufacturing was one of the bright spots in 2014 and is expected to remain so in 2015. Nevertheless, the ISM should show some continued slowing in activity in December with a reading of 57.0 after falling 0.3% to 58.7 in November. The 59.0 October print tied for the strongest reading since March 2011. The final Markit PMI is also scheduled to be released Friday.

Consumer confidence scheduled for Tuesday should climb to 94.0 in December from 88.7 in November. Confidence has been generally building along with the improvement in employment and record highs in stocks. The December Chicago ISM scheduled for Wednesday is expected to sink to 59.5 from 60.8 previously. Also due are initial jobless claims which is scheduled to be released on Wednesday are forecasted to rise 10k to 290k in the week ended December 28 after falling 9k the week before.

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