每周经济评论

US China Eurozone Despite strong labor markets, a rise in US jobless rateto a 2-year high is paving the way for mid-year ratecuts.In February,nonfarm payrolls expanded by275,000, beating expectations of +198,000. However,the unemployment rate rose to a 2-year high of 3.9%and increases in average hourly earnings also easedto4.3%YoY.The Services PMI slipped to 52.6.Inaddition,the Senate has approved a USD 467bnspendingpackage,thus avoiding a governmentshutdown on 8 March, though the next deadline forapproving government funding will come as soon as22 March. China set 2024 economic targets close to 2023 amid deepstructural problems, while US attempts to further restrictChina’s access to hi-tech products.China recently has set2024targets for GDP growth of around 5%,matching2023’s, and for other key indicators such as inflation andbudget deficits at close to 2023’s levels (see table). Plans totackle structural issues include job creation, FDI attraction,the birthrate and promoting the“new quality productiveforces”such as EVs,hydrogen power,space flight,andquantumtechnology that will drive the future economy.However, tech export restrictions by the US and its alliescould be a significant hindrance to growth. Recently, the UShas tried to prevent the Dutch ASML from servicing Chinesechip equipment, called for Japan to stop exports of chipproduction materials, and is negotiating with Germany andSouth Korea to raise the pressure on China. The ECB has trimmed its forecast for 2024 inflation andgrowth,signaling possible rate cuts this year.InJanuary,the Producer Price Index fell more than themarket expectation at-8.1% YoY and-0.9% MoM. Also,retail sales contracted deeper at-1% YoY, compared to-0.5% a month earlier. However, good news was foundinFebruary’s Services PMI,which rose to 50.2,itshighest since July 2023, and this was enough to lift theComposite PMI to a 1-year high of 49.2. The European Central Bank (ECB) has voted to leavethe policy rate at 4%, and the bank has also cut itsforecastfor 2024 GDP growth and inflation fromrespectively 0.8% to 0.6% and 2.7% to 2.3%. AlthoughtheECB has not indicated when it feels rate cutsshouldbe made,the economy is stagnating,andinflation is falling and is approaching the 2% target.We therefore expect that given thisenvironment,theECB will begin cutting policy rates in the middle of theyear.Nevertheless,the Eurozone economy likelypassed through the worst in 4Q23, anda number offactorspoint to a slow recovery in 2024,theseincluding: (i) the easing of the energy crisis; (ii) coolinginflationary pressures and the positive impacts of thisonconsumption;(iii)the easing of supply chaindisruptions; and (iv) effects of last year’s low base. Fed Chair Powell has said that policy rates will fallthis year if clear signs emerge that inflation is backto the 2% target for long term manners. Core CPI andcore PCE are likely to fall below 3% in Q3, meaningthat real interest rates will be close to the 2.5% seenin 2008, while data indicate that labor markets areweakening. Thus, with indicators softening and pricerises easing, the Fed may begin considering mid-yearcutsto normalize policy interest rates.In addition,theSuper Tuesday primary votes from 15 statesindicate that November’s 2024 presidential electionwill almost certainly involve arun-off between JoeBidenand Donald Trump,and this will add touncertainty through 2H24. China’slatest economic targets indicate a move awayfrom short-term large-scale fiscal measures and towardsan increased focus on targeted structural reform that willpayoff over the mid to long terms.This is especiallyevidentin the emphasis on“new quality productiveforces”and efforts to reform the regulatory and legalenvironment. However, with chronic structural problems,the ongoing tech war, and mild fiscal stimulus, we expectgrowth in 2024 to fall below target to around 4.6%, downfrom 5.2% in 2023. Headlineinflation remained negative in February forthe5thmonth,but may have passed its bottom andcould turnpositive in Q2.Headline inflation stood at-0.77% YoY in February, compared to a 35-month low of-1.11% in January. The price index was depressed by theincreased supply and thus falling prices of fresh meatand vegetables, and the effect of government policy onthe cost of diesel and electricity, which were lower thantheir levels at the same period last year. Core inflation,which excludes raw food and energy costs, also cooledfrom0.52%to 0.43%.For 2M24,headline and coreinflation stand at-0.94% and0.47%respectively. ConsumerConfidencemaintaineditsupwardtrajectory through February, and going forward, thetourismsector will continue to underpin risingconsumption.In February, the Consumer ConfidenceIndex rose from 62.9 in January to 63.8, its 7thmonthof increases and its highest in 4 years. Sentiment hasbeenboostedbythestimuluseffectsofthegovernment’s Easy-E-Receipt scheme, official help withthe cost of living that has cut energy bills, and theongoing recovery in the tourism sect