KUWAIT: The US ISM Manufacturing PMI climbed to 50.9 in January, surpassing the neutral 50 mark for the first time since 2022, driven by strong gains in new orders and production. The data was collected before President Trump announced tariffs on Canada, Mexico, and China, though Canada and Mexico secured a 30-day delay in exchange for stricter border controls. Global trade uncertainty remains high, with Trump also threatening tariffs on the European Union and signaling further economic and immigration measures.

US job market softens

The US JOLTS report shows job openings fall by 556,000 to 7.6 million in December 2024, signaling a cooling in the labor market, while hiring remained steady at 5.462 million. Economists had expected 8.01 million openings. Layoffs stayed at 1.8 million, while companies showed reluctance to add workers after the post-COVID hiring surge. The data comes following a decision from the Federal Reserve to keep interest rates unchanged in January at 4.25 percent-4.5 percent.

The ISM Services PMI for the US dropped to 52.8 in January 2025 from 54.1 in December, below the expected 54.2, signaling a slower expansion in the services sector. Business activity (54.5 vs 58) and new orders (51.3 vs 54.4) grew at a weaker pace, while inventories remained in contraction (47.5 vs 49.4). However, employment (52.3 vs 51.3) and new export orders (52 vs 50.1) improved, and price pressures eased (60.4 vs 64.4). Poor weather and concerns over potential US tariffs were noted, though their immediate business impact was minimal.

Private sector hiring

In January 2025, the US private sector added 183K jobs, surpassing December’s revised 176K and beating forecasts of 148K. The hiring momentum from Q4 continued, though manufacturing lagged. Consumer-facing industries drove job growth, while business services and production were weaker. The service sector added 190K jobs, led by trade/transportation/utilities (56K) and leisure/hospitality (54K). The goods sector lost 6K jobs, with manufacturing (-13K) offsetting gains in natural resources/mining (4K) and construction (3K). Annual pay growth was 4.7percent for job-stayers and 6.8 percent for job-changers.

In January, US Nonfarm Payrolls (NFP) rose by 143,000, below the 169,000 market expectation, following an upwardly revised 307,000 gain in December. The unemployment rate fell to 4 percent from 4.1 percent, while Labor Force Participation edged up to 62.6 percent. Wage inflation, measured by Average Hourly Earnings, increased 4.1 percent, surpassing the 3.8 percent forecast. Revisions to prior data showed November and December payrolls 100,000 higher than initially reported. The US Dollar Index responded by rising 0.15 percent, last seen at 107.85, with the USD performing strongest against the Swiss Franc. The US Dollar index closed the week at 108.04.

Eurozone inflation increases

Eurozone inflation rose to 2.5 percent year-over-year in January, exceeding expectations as energy costs surged, according to preliminary data from Eurostat. Economists had predicted inflation would remain at December’s 2.4 percent. Core inflation, which excludes volatile items like food and energy, held steady at 2.7 percent since September, while services inflation edged down slightly to 3.9 percent from 4 percent in December. Energy prices saw a sharp annual increase of 1.8 percent, up from just 0.1 percent in December. Last week, the ECB cut interest rates by 25 basis points, bringing the deposit facility rate to 2.75 percent. It is expected to implement further reductions throughout the year, with markets anticipating three more rate cuts by year-end. The EUR/USD currency pair closed the week at 1.0327.

BoE cuts rates

The Bank of England reduced its benchmark interest rate by 25 basis points to 4.5 percent in February 2025, marking its third rate cut since August of the previous year. The decision was unanimous among all nine Monetary Policy Committee members, despite earlier expectations of an 8-to-1 vote. Two members, including Catherine Mann, supported a larger 50bps cut. The Bank reaffirmed its gradual approach to monetary easing, citing concerns over economic growth and persistent services inflation. Additionally, it revised its growth forecast downward, acknowledging that economic activity has fallen short of expectations since November. This signals a shift toward a more dovish stance, balancing the risks between economic growth and inflation. The GBP/USD currency pair closed the week at 1.2409.

New Zealand’s unemployment rate increased to 5.1 percent in Q4 2024, up from 4.8 percent in the previous period, marking the highest level since September 2020 and aligning with market expectations. The number of unemployed individuals rose by 7,000 to 156,000. Meanwhile, the labor force participation rate slightly declined to 71 percent from 71.1 percent. Additionally, the underutilization rate, which includes both unemployed and underemployed individuals, edged up to 12.1 percent from 11.6 percent in the previous quarter, indicating a modest rise in labor market slack.

The NZD/USD currency pair closed the week at 0.5660.

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