Weekly Global Macro Outlook: PMI, Inflation & Labor (January 04–09, 2025).

Table of Contents

1. Market Overview: Volatility Fades After Geopolitical Shock
2. Global PMI Snapshot: Growth vs Contraction
3. Inflation Trends: Disinflation Without Deflation
4. Labor Markets: Cooling, But Not Cracking
5. Central Bank Implications & Rate Cut Expectations
6. Conclusion: What This Means for Global Markets
7. FAQs

1. Market Overview: Volatility Fades After Geopolitical Shock

The first trading week of the year opened with elevated volume and volatility, triggered by a brief geopolitical escalation following US intervention in Venezuela.
Initial reactions were visible across oil markets and safe-haven assets, reflecting standard risk-off positioning.

However, the market impact proved short-lived.
Oil prices retraced early gains, and broader risk sentiment stabilized.

2. Global PMI Snapshot: Growth vs Contraction

Asia-Pacific

• Japan Manufacturing PMI rose to 50.0 from 48.7, signaling a return to expansion for the first time since June, driven by employment growth and improving demand expectations.
• Japan Services PMI eased to 51.6, still expansionary, marking the ninth consecutive month of growth despite slower new orders.
• China Services PMI remained stable at 52.0, with continued expansion but ongoing weakness in employment.
• Australia Services PMI slipped to 51.1, reflecting softer new orders and export demand.

United States

• ISM Manufacturing PMI fell further into contraction at 47.9, led by declines in production and inventories.
• ISM Services PMI, however, surged to 54.4, the strongest reading since October 2024, supported by seasonal activity and year-end business preparation.

Europe & UK

• Eurozone Services PMI eased to 52.4, still firmly expansionary, with slower new business growth.
• UK Services PMI edged higher to 51.4, marking the eighth consecutive month of expansion, though input and output price pressures intensified.

Canada

• Canada Services PMI improved slightly to 46.5 but remained in contraction for the entire year to date, highlighting persistent domestic weakness.

3. Inflation Trends: Disinflation Without Deflation

• Eurozone inflation held steady at 2.0% YoY, reinforcing confidence that price stability has been achieved without undermining growth.
• Australia inflation slowed to 3.4% YoY, the lowest since August, driven by easing housing and electricity prices.
• China inflation edged up to 0.8% YoY, while PPI improved to -1.9%, suggesting gradual progress but still justifying accommodative policy.
• Eurozone PPI dropped sharply to -1.7%, easing producer price pressures but raising medium-term deflation risks if demand weakens.

4. Labor Markets: Cooling, But Not Cracking

• US JOLTs job openings declined to 7.146M, signaling continued labor market cooling.
• US Non-Farm Payrolls slowed to 50K, while unemployment unexpectedly fell to 4.4%, complicating the disinflation narrative.
• Canada unemployment rose to 6.8%, despite modest job gains driven by full-time employment.
• Eurozone unemployment improved slightly to 6.3%, remaining within healthy historical ranges.

5. Central Bank Implications & Rate Cut Expectations

The mixed data backdrop has reinforced cautious central bank positioning:

• The Federal Reserve is now firmly priced for two rate cuts in 2026, with upside inflation risks limiting dovish repricing.
• The ECB is likely to remain on hold, balancing stable inflation against weakening producer prices.
• China’s central bank is expected to maintain a loose stance to support reflation efforts.

Conclusion: What This Means for Global Markets

Global markets remain resilient but selective.
Services strength continues to offset manufacturing weakness, while inflation progress allows policymakers to stay patient.
Volatility is likely to remain event driven rather than trend driven in the near term.

FAQs (Schema-Ready)

Q1: Why did oil prices react briefly to geopolitical tensions?
Oil markets respond quickly to supply risks, but without escalation, premiums tend to fade rapidly.

Q2: Are global PMIs signaling recession risks?
Manufacturing remains weak, but services expansion suggests a slowdown rather than a recession.

Q3: Will central banks cut rates sooner than expected?
Current data supports patience, with rate cuts more likely in 2026 unless growth weakens materially.