US mood upbeat as job numbers surge despite international worries
Published 11/01/2016 | 02:30
The US economy ended last week with positive news.
Job numbers surged in December and the job count for the prior two months was revised sharply higher, showing the economy on solid ground despite a troubling international backdrop.
So-called payrolls for October and November were revised to show 50,000 more jobs created than previously reported, adding to the report's upbeat tone.
The robust employment data helped soothe fears about the economy's health, and suggested recent weakness would largely be contained to the manufacturing and export-oriented sectors, which have been hit by a strong dollar and anaemic global demand.
The country will be hoping for more positive news this week with the release of retail sales.
Experts believe they will have climbed in December for a third month, indicating consumer spending is helping give the world's biggest economy a boost.
An acceleration in US wage growth is also reinforcing the Federal Reserve's view that inflation is poised to rebound and could lead the central bank to raise rates more this year than many investors expect.
Investors had been doubting the Fed's resolve to raise interest rates, betting on fewer increases this year.
But signs of strength in the US economy is changing that view.
The Fed last month raised rates by a quarter point from near zero, the first increase in a decade.
Fed chair Janet Yellen has warned that if data suggests inflation and employment will rise more quickly than policymakers expect, the central bank could be more aggressive at raising rates. Friday's data gave signs of strength on both fronts.
"With the Fed feeling confirmed in its baseline scenario, the next rate increase is only a matter of time. We expect the Fed to move at the March meeting," said Commerzbank economist Christoph Balz.
But there may be a cloud on the horizon. Industrial production is expected to have declined in December for a fourth month, a separate report could indicate.
Tomorrow, US President Barack Obama delivers the State of the Union address in Washington. The speech will be Obama's last chance to tout his proposals in the final full year of his presidency. It will also serve as a platform to publicly push his proposals in the fiscal 2017 budget.
Elsewhere, the Bank of England will keep its key interest rate unchanged at 0.5pc and its asset-purchase target at £375bn as uncertainty surrounding the UK's possible exit from the EU threatens to weigh on the economy. Some analysts have pushed back forecasts for the first rate increase to November.
Here, the main focus for the week will be trade figures for November and inflation figures for December - both from the CSO.
"We expect the trade surplus to be lower than in October, which was the highest monthly number for 2015 to date," said Alan McQuaid of Merrion Stockbrokers.
"The overall surplus in 2015 is in our view now likely to be in and around the €43-44bn level, and with every chance of another very positive year on the external trade front in 2016."