Manufacturing Weekly Economic Highlights | 13 January 2025
Welcome to our weekly manufacturing and economic newsletter, providing key insights and analysis on the latest developments in the global market. Stay updated and make informed decisions!
In this edition, we focus on the economic conditions in America, Europe, China, and Taiwan, as well as updates on the commodity, energy, and logistics markets.
North America
“The DXY again closed moderately higher this week”
“USD surges to highest level since late 2022 . . .”
“. . . driven by a strong jobs report and unemployment falling to 4.1%”
“2025 Fed policy rate cut increasingly unlikely, chance for a rate hike grows”
The USD Index (DXY) finished moderately higher again this past week, from 108.92 on 3 January 2025 to close at 109.64 on 10 January 2025. The DXY is up 0.63% for the week, up 2.46% for the month, up 1.07% YTD, and up 7.07% over the past 12 months.
The USD surged this week to the highest level since November 2022 following a “hotter-than-expected” US jobs report makes further US Fed policy rate cuts unlikely during 1H25, as reported on 10 January by Bloomberg.
US banks Citigroup, Bank of America. And Goldman Sachs revised their US Fed rate cut expectations. Bank of America forecasts no policy rate cuts in 2025, revised from its prior forecast of two 25 bp cuts in 2025.
Barron’s reported on 7 January that US 10-year Treasury note yields rose to 4.695%, their highest rate since April amid market concerns of renewed inflation following strong activity growth in the services sector. Traders are also concerned about tax cuts including Trump’s proposed elimination of taxes on tips and social security could lead to more government borrowing to cover the revenue shortfall.
Some analysts are forecasting 10-year treasuries to reach 5% or more in 2025, noting that the US Fed eased policy rates prematurely as inflation had not yet fallen to the Fed target of 2.0%.
Reuters reported on 10 January that the US economy added 256,000 jobs in December far exceeding most analysts’ expectations. The unemployment rate fell to 4.1% from 4.2% in November, and for 2024 averaged 4.0% compared with 3.6% in 2023.
As has been common during the past four years, the Bureau of Labor Statistics revised its jobs data downward for October and November, reducing the job gains by 8,000 positions.
Job gains were led by healthcare with 46,000 positions, followed by retail adding 43,000 jobs, and leisure and hospitality increasing 43,000.
Manufacturing employment decreased by 13,000 jobs, mostly in semiconductors and other electronic component manufacturing. Mining and logging employment also fell.
Average hourly earnings increased 3.9% YoY and 0.3% MoM in December, down from 4.0% YoY and 0.4% MoM in November. The average workweek remained unchanged at 34.3 hours.
Labor force participation rate remained steady at 62.5% for the third consecutive month. The median duration of unemployment decreased to 10.4 weeks in December from a three-year high of 10.5 weeks in November.
The Wall Street Journal reported on 10 January that US consumer confidence fell to 73.2 in early January from 74.0 in December.
Consumer views about their personal finances improved by 5%, but their economic outlook fell by 7% for the short term and 5% for the long term, reflecting easing present-day cost-of-living concerns amid concerns for rising inflation.
MarketWatch reported on 10 January that the CME FedWatch tool is pricing a single 25 bp policy rate cut during 2025, following the Fed’s December rate cut to the range of 4.25% to 4.5%.
Bank of America analysts expect no Fed rate cut in 2025, with a growing possibility that the Fed will raise policy rates during 2025.
Europe
“The EUR closed moderately lower again this week relative to the USD”
“Eurozone inflation rises to 2.4%, core inflation steady at 2.7%”
“EU Economic Sentiment Indicator falls to 93.7”
“German Industrial Orders fall 5.4% MoM in December”
The EUR moderately lower again this week, from $1.032 per EUR on 3 January 2025 to close at $1.026 per EUR on 10 January 2025. The EUR is down 0.52% for the week, down 2.36% for the month, down 0.98% YTD, and down 6.36% over the past 12 months.
Eurozone inflation increased 2.4% YoY in December. Up from 2.2% in November, primarily driven by increased energy costs which rose for the first month since July 2024.
Core inflation remained steady at 2.7% YoY. Inflation in the services sector increased to 4.0% YoY.
Bloomberg Economics said, “A large part of the increase comes from fuel price base effects - there’s no evidence that domestic cost pressure is moving materially upwards. The big picture remains one of generalized disinflation which will allow the Governing Council to keep cutting this year — we expect 100 basis points of easing.”
Inflation was higher than expected in Germany and Spain, and less than expected in France and Italy. More than half of Eurozone countries have headline consumer inflation exceeding 2% YoY.
Bloomberg noted that Europe is depleting its natural gas inventories at the fastest pace in seven years amid cold weather and a cutoff of pipeline gas supplied via Ukraine.
Analysts are anticipating further European Central Bank (ECB) rate cuts following its 25 bp cut in December to 3.0% This would further increase the rate differential with the US, adding downward pressure on the EUR.
Reuters reported on 6 January that the Eurozone ended 2024 on a downward trend with little hope for a recovery in the near future.
The EU’s Economic Sentiment Indicator fell to 93.7 in December from 95.6 in November. An index value of 100 represents the long-term average.
Industrial orders in Germany declined 5.4% MoM in December amid high energy costs, decreased Asian demand, and low-cost competition. German retail sales fell by 0.6% MoM.
The Joint Harmonized EU Programme of Business and Consumer Services for 8 January 2025 also showed Industry Confidence falling in December by 2.2 reflecting a significant decline in manager’s production expectations and assessment of current orders and finished goods inventory.
The Employment Expectations Indicator fell further below its long-term average by 1.1 points reflecting deteriorating employment plans across industry, services, and construction, slightly offset by a gain in the retail trade sector.
The Selling Price Expectations index increased across all sectors, let by significant increase in services and construction, and moderate increases in retail trade and industry.
The EU Economic Uncertainty Indicator gained 1.1 points to 17.2 driven by increased business uncertainty in industry and retail trade.
China
“The CNY closed moderately lower again this week”
“CNY approaching 16-month low . . .”
“. . . and could fall to 7.5 per USD by end 2025”
“China government bond yields plummet as investors flee risk assets . . .”
“ . . . with yield differential 300 bp to US Treasuries raising deflationary pressure on CNY”
“Are Chinese official GDP statistics accurate?”
The CNY ended moderately lower again this week, from 7.321 per USD on 3 January 2025 to close at 7.333 per USD on 10 January 2025. The CNY is down 0.17% for the week, down 0.78% for the month, down 0.48% YTD, and down 2.38% over the past 12 months.
The CNY has fallen 1.3% since the beginning of December and is approaching a 16-month low, as reported on 9 January by The Wall Street Journal.
Many economists anticipate the CNY ending the year at 7.5 per USD, the weakest level in nearly twenty years.
The devaluation of the CNY is being driven by market expectations that Trump’s proposed tariff and trade policies will lead to the Chinese Government accepting a weaker CNY to support exports.
During Trump’s first round of tariffs on Chinese goods in 2018 and 2019 the CNY devalued 13% relative to the USD.
Meanwhile, Chinese government bond yields are falling, with the benchmark 10-year Chinese treasury bond slumping to an all-time low of 1.6%, as Chinese investors flee risk assets seeking safe-haven assets including Chinese treasuries, as reported on 9 January by The Wall Street Journal.
The yield gap between 10-year US and Chinese treasury bonds has surged to an unprecedented level of 300 bp, raising devaluation pressure on the CNY.
In response, the People’s Bank of China (PBOC) has announced that it has paused is purchase of Chinese government bonds. The halt in bond purchases signals that the PBOC doesn’t want to see further decline in government bond yields which would increase depreciation pressure on the CNY.
Amid the ongoing Chinese property crisis, Bloomberg reported on 7 January that Chinese property developers face repeat default risks in 2025.
JPMorgan Chase analysts predict that Chinese property developers will be the biggest source of defaults in Asia in 2025, comprising two-thirds of all defaults.
Property developers who previously defaulted are facing their first bond maturity since being restructured. The JPMorgan report said, “while some have the option to extend bond maturities as allowed in their restructuring schemes, others may not have this flexibility, setting them up for another default.”
Creditsights Head of East Asia Corporate Research Zerlina Zeng said, “the property downturn is far from over: we see increased asset revaluation and liquidity risk among Hong Kong property credits.”
Newsweek reported on 9 January that a top Chinese economist has been censored by the Chinese government following comments he made concerning the accuracy of China’s official GDP figures.
SDIC Securities Chief Economist and former PBOC official Gao Shanwen suggested that China’s GDP figures could be overstated by several percentage points. He said, “we do not know the true number of China's real growth figure.” He was also quoted as saying, “my own speculation is that in the past two to three years, the real number [for GDP growth] on average might be around 2 percent, even though the official number is close to 5 percent.”
On 5 December Newsweek published an article citing Gao Shanwen’s report that outlined statistical inconsistencies in China’s economic data. Gao was quoted as saying, “among China's aggregate data, the most reliable is price, which can be sampled and is difficult to manipulate by various forces. In contrast, other data is more vulnerable to non-statistical factors.”
Gao also discussed the correlation between GDP growth and employment. Prior to the Covid pandemic, economic growth was correlated with increased urban employment. However, post-Covid this correlation is no longer valid.
Gao said, “if we think the employment data is credible, then economic growth is too high. If we think the economic growth data is credible, then the employment data is too low.”
Gao’s analysis suggested a “cumulative overestimation of 10 percentage points, which corresponds to the loss of 47 million urban employed people.”
Around Asia: Taiwan
“The TWD closed moderately lower again this week”
“Taiwan maintains policy rate at 16-year high of 2.0%”
“Taiwan 2024 inflation estimated at 2.18% YoY, with 2025 forecast to be under 2%”
“Taiwan’s trade surplus with USA surges 83.5% . . .”
“. . . potentially raising trade tensions with incoming Trump administration”
The TWD ended moderately lower again this week, from 32.93 per USD on 3 January 2025 to close at 33.10 per USD on 10 January 2025. The TWD is down 0.54% for the week, down 1.82% over the past month, down 0.92% YTD, and down 6.48% over the past 12 months.
Taiwan’s central bank, the Central Bank of the Republic of China (CBC), maintained its benchmark discount rate at 2.000% with secured and unsecured loan rates at 2.375% and 4.250% respectively, as reported on 19 December by The Wall Street Journal.
This benchmark rate is at the highest level in sixteen years, as the CBC focuses on managing overall financial stability.
The policy rate decision was widely anticipated, with the central bank attributing the rate hold to cooling domestic inflation and global economic conditions.
The CBC forecast 2024 inflation at 2.18% with 2025 inflation projected at below 2%.
The CBC also raised its forecast for 2024 GDP growth from 3.82% to 4.25%, more than triple the 2023 GDP growth.
Meanwhile, Taiwan’s 2024 trade surplus with the US surged by 83.5% YoY to a record high of $64.9 billion USD, the sixth consecutive year of net growth in its trade surplus, as reported on 9 January by Bloomberg.
Taiwan’s expanding trade surplus could raise tensions with the incoming Trump administration.
The CBC has proposed boosting Taiwan’s purchases of US energy, agricultural goods, and military equipment to reduce its trade surplus with the US.
Taiwan’s trade surplus with China fell to $17.7 billion in 2024, the lowest level since 2023. This reflects both a slowdown in China’s economy and Taiwan’s decreasing economic reliance on China amid high geopolitical tensions.
Taiwan’s December exports rose 9.19% YoY driven by rising demand for high-tech products including advanced semiconductors to support the booming AI industry.
Taiwan imports in December surged 30.40% YoY.
Bloomberg reported on 29 November that Taiwan increased its 2025 GDP forecast from 3.26% to 3.29% despite looming Trump administration tariff and trade policies.
Taiwan Statistics Bureau Deputy Head Tsai Hung-kun said that “if global trade volume decreases, that’s not favorable for us.” However, he also noted that Trump’s proposed tax cuts could boost US demand and imports “which could benefit Taiwan.”
Commodities
“GSCI Commodity Index climbed moderately higher again this week”
“The GSCI Industrial Metals rebounded moderately higher this week”
“Copper prices may continue to slide in 2025”
“Iron ore prices predicted to fall to $95 per ton in 2025”
“Lithium market to return to balance in 2025 as demand growth catches up to reduced supply”
The GSCI Commodity Index finished moderately higher again this week, from 553.64 on 3 January 2025 to close at 570.97 on 10 January 2025. This index is a weighted index based on world-production of each commodity in the index, with energy and industrial metals comprising the bulk of the index weighting. The GSCI is up 3.88% YTD. Trading Economics has maintained its GSCI forecast this week at 556 by the end of 1Q25 and 577in 12 months.
The GSCI Industrial Metals index finished moderately higher this week, from 434.65 on 3 January 2025 to close at 442.97 on 10 January 2025. The Industrial Metals Index is up 8.82% over the past 12 months.
Copper prices in 2025 may continue to slide from record highs in May 2024 as a mix of high inflation, rising interest rates, and a strong USD weighs on all metals markets, as reported on 6 January by CNBC.
Copper prices will be pressured by a possible deceleration in the green energy transition amid shifting Trump administration policies.
Iron ore prices are also expected to drop amid oversupply resulting from Chinese policies and geopolitical pressures.
Goldman Sachs forecast 2025 iron ore prices to drop to $95 per ton, saying “the expected U.S. tariffs on China, changing nature of Chinese stimulus and new low-cost supply [will] push the market into further surplus.”
Meanwhile, Morgan Stanley recently published a note advising that lithium prices have “likely found a near-term floor” as reported on 7 January by Proactive.
Lithium producers have cut supply in 2024 in response to low prices, however market demand has continued to grow. Morningstar predicts that the lithium market will return to balance in 2025 as demand growth catches up to supply. This should buoy lithium prices.
Energy
“Crude gushed moderately higher again this week”
“Henry Hub rebounded moderately higher this week”
“EU Natural Gas retreated moderately lower this week”
“Oil prices being supported by market expectations of growing demand”
“Europe imported record volume of Russian LNG in 2024”
“Excess renewable energy production in Europe pushing prices below zero on sunny / windy days”
Brent Crude finished moderately higher again this week, from $76.69 USD per barrel on 3 January 2025 to close at $79.79 USD per barrel on 10 January 2025.
Henry Hub finished moderately higher this week, from $3.37 USD per MMBTU on 3 January 2025 to close at $3.83 USD per MMBTU on 10 January 2025.
EU Natural Gas finished moderately lower this week, from €49.61 per MWh on 3 January 2025 to close at €45.44 per MWh on 10 January 2025, equivalent to $12.99 USD per MMBTU. EU Natural Gas is down 9.94% YTD. Trading Economics maintained its EU Natural Gas TTF forecast this week at €52.46 per MWH by the end of 1Q25 and €58.72 per MWh in 12 months.
Crude prices climbed higher this week amid market demand optimism, as reported on 9 January by MarketWatch.
SIA Wealth Management Portfolio Manager and Chief Market Strategist Colin Cieszynski said, “the oil story remains primarily demand driven. Support appears to be coming in on expectations of an improved U.S. economy this year, and the potential for stimulus in China to improve demand there as well.”
US Natural Gas also gained this week following the EIA report released on 8 January that showed natural gas supplies declined by 40 billion cubic feet for the week ending 3 January.
The Guardian reported on 9 January that Europe purchased a record amount of LNG from Russia in 2024, up more than 2 million tons from 2023 to reach 17.8 million tons in 2024.
Russia overtook Qatar in 2024 to become Europe’s second biggest supplier of LNG in 2024, with the US remaining in the top spot.
Russian LNG is being offered at a discount compared with alternative suppliers, and there are currently no sanctions applied to Russian LNG exports.
EU member states agreed in June 2024 to ban transshipment of Russian LNG to non-EU countries starting in March 2025. He EU has also pledged to stop importing Russian fossil fuels by 2027, but thus far it has not banned the import of Russian LNG.
Meanwhile, European electricity markets are struggling to consume the solar and wind generated power being produced by its green energy industry, as reported on 10 January by Bloomberg.
In 2024 German experienced a 60% YoY increase in the number of hours of negative power prices to 468 hours. France saw negative power price hours more than double to 356.
Sunny and/or windy days can cause excess renewable energy generation, requiring power users to be paid to consume the excess energy. However, green energy subsidies incentivize some producers to continue production even when prices fall to zero, further distorting energy markets.
Grid congestion is also limiting European renewable power generation, when infrastructure does not exist to transmit power from generating site to consumers. This is particularly relevant to wind turbines which are typically located further from demand centers.
Logistics
“The BDI floundered modestly lower this week”
“The CFI sank moderately lower this week”
“US dock workers reach new tentative labor agreement averting 15 Jan strike”
“Trump facilitated negotiations”
“US blacklists Cosco and two Chinese shipbuilders”
Baltic Dry Index finished modestly lower this week, from 1,072 on 3 January 2025 to close at 1,048 on 10 January 2025. The BDI is up 5.12% YTD. Trading Economics has maintained its BDI forecast this week at 957 by the end of 1Q25 and 846 in 12 months.
The Containerized Freight Index finished moderately lower this week, from 2,505.2 on 3 January 2025 to close at 2,290.7 on 10 January 2025. This index tracks the current freight prices for containerized transport from the most important Chinese ports. The CFI is down 6.90% YTD. Trading Economics has maintained its CFI forecast this week at 2,551 by the end of 1Q25 and 2,845 in 12 months.
US East Coast and Gulf Coast dock workers reached a new tentative labor agreement to avert a 15 January strike, as reported on 9 January by Axios.
The International Longshoremen’s Association (ILA) and the United States Maritime Alliance (USMX) which represents the shipping companies, announced a tentative six-year agreement.
The details of the tentative agreement were not announced, but sources indicate that the union agreed to allow shippers to implement some semi-automation features in return for guarantees of new jobs for union workers.
Meanwhile, BPR reported on 9 January that ILA executives met with President-elect Trump on 12 December to negotiate a labor deal.
ILA President Daggett said, “President Trump clearly demonstrated his unwavering support for our ILA union and longshore workers with his statement ‘heard round the world’ backing our position to protect American longshore jobs against the ravages of automated terminals. President Trump’s bold stance helped prevent a second coast wide strike at ports from Maine to Texas that would have occurred on January 15, 2024, if a tentative agreement was not reached.”
President Trump spoke by phone to USMX representatives on 12 December in the presence of the ILA executives to negotiate a settlement.
Bloomberg reported on 6 January that the US has blacklisted China’s largest shipping line Cosco Shipping Holdings Co. plus two Chinese shipbuilders because of alleged links with the People’s Liberation Army (PLA).
The blacklist carries no specific penalties, but discourages US firms from dealing with blacklisted companies.
In addition to the shipping companies, the US blacklisted Tencent Holdings Ltd, Contemporary Amperex Technology Co. Ltd., and Chinese oil company CNOOC Ltd.
Cosco was previously sanctioned by the US in 2019 for hauling Iranian oil. The sanctions were lifted in 2020.
For more information on any of the topics and data discussed in this newsletter, including details of the source articles cited in this newsletter, contact Tractus via its LinkedIn page or visit the Tractus website at www.tractus-asia.com.
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