Datatrack - Blog

2026-01-14

US December Overall CPI Holds Steady at 2.7%, Deflation Process Remains Slow

On January 13, 2026, the U.S. Bureau of Labor Statistics (BLS) released the Consumer Price Index (CPI) data for December 2025. On a seasonally adjusted basis, the year-over-year (YoY) increase remained stable at 2.7% (flat compared to November), while the month-over-month (MoM) CPI increased by 0.3%. Both figures met market expectations. This increase was primarily driven by shelter and food prices, indicating that the disinflationary process is slow and remains significantly above the Federal Reserve’s 2% target. Core CPI (excluding food and energy) posted a 2.6% YoY increase, lower than the market expectation of 2.7%, marking a new low since March 2021. The MoM increase for core CPI was 0.2%. Following the data release, the market anticipates that these figures will support the Federal Reserve’s stance of maintaining a persistently cautious policy. Detailed Data Performance: Food:** The Food Index rose 0.7% MoM and 3.1% YoY. Specifically, food away from home increased 4.1% YoY, while food at home rose 2.4% YoY. Although meats, poultry, fish, and eggs saw a 3.9% YoY increase, egg prices fell sharply by 8.2% MoM. Energy:** The Energy Index rose 0.3% MoM and 2.3% YoY. Natural gas surged 4.4% MoM and 10.8% YoY, while gasoline fell 0.5% MoM (down 3.4% YoY). Electricity costs saw a slight decrease of 0.1% MoM. Core Services:** Shelter remained the primary driving force in core services, increasing 0.4% MoM and 3.2% YoY. Both Owners’ Equivalent Rent (OER) and Rent of Primary Residence rose 0.3% MoM. Other services, such as medical care (up 3.2% YoY) and personal care (up 3.7% YoY), also contributed to the pressure. Durable Goods:** Prices for durable goods generally fell. Used cars and trucks decreased 1.1% MoM, communications costs fell 1.9% MoM, and household furnishings dropped 0.5% MoM. Other Services:** Service prices, conversely, continued to rise. Airline fares jumped 5.2% MoM, and recreation rose 1.2% MoM, hitting a new monthly historical high. Overall, December inflation remained stable at a lower level, with both the headline (2.7%) and core (2.6%) YoY rates meeting expectations. Inflationary pressure primarily stemmed from persistently high shelter prices and food items, while energy prices were influenced by oil price fluctuations. Conversely, the effects of tariffs and a softening labor market suppressed prices for certain goods, and the decline in core goods prices provided a buffer against overall inflation. In the short term (1-2 months), the MoM CPI rate is expected to stabilize further in the 0.2%–0.3% range. The Federal Reserve will continue to closely monitor labor market data before determining the timing of interest rate cuts. In the medium term (the next six months), attention must be paid to the potential impact of Trump’s proposed tariff policies, which could lead to increased supply chain costs and push inflation back above 3%. In this scenario, the Fed’s room for rate cuts will be limited, and the market will need to closely monitor changes in trade friction and the employment market. Read More at Datatrack

By ariachiang

2026-01-13

Latest US-Taiwan Tariff Negotiations: Rate Cut to 15% in Exchange for TSMC US Factory Expansion

Taiwan and the United States have achieved a major breakthrough in tariff negotiations. The U.S. will lower tariffs on Taiwanese exports from the original 20% to 15%, as of the latest update on January 13, 2026. This move grants Taiwan the same import treatment as Japan and South Korea, helping to reduce the cost of exports to the U.S., particularly benefiting the semiconductor and ICT sectors, which together account for nearly 90% of Taiwan’s trade surplus with the U.S. Following the announcement, the Taiwan stock market opened sharply higher on January 13, reaching an intraday high of 30,973 points, while TSMC’s stock surged to a record NT$1,720, with trading volume accounting for nearly 30% of the total market. The progress in negotiations is mainly driven by the U.S.’s trade reshaping strategy, using tariffs as leverage to secure increased investment from allies, thereby strengthening national security and supply chain resilience. The U.S. places high importance on advanced chip supply. Amid rising geopolitical risks, it has requested TSMC to expand capacity in Arizona, planning at least five new fabs with a total investment potentially exceeding US$165 billion. Taiwan, meanwhile, went through multiple rounds of talks, including the first phase from April to July 2025. The Executive Yuan’s Office for Trade Negotiations noted that both sides have reached consensus on tariff reductions and principles for supply chain cooperation, while also striving to avoid overlapping tariffs and ensuring benefits related to Section 232. In the short term, the agreement is expected to complete legal review and be officially announced by the end of January 2026, further boosting the Taiwan stock market and export confidence. In the medium term, it will help Taiwan’s semiconductor industry deepen cooperation with the U.S., though attention must be paid to rising investment costs for new fabs and potential production delays extending into the 2030s. For the U.S., the agreement is expected to drive substantial expansion of advanced semiconductor capacity, accelerate domestic chip manufacturing, strengthen supply chain security, and meet AI demand, creating tens of thousands of jobs and reducing reliance on overseas suppliers. Overall, the market outlook remains positive. Supported by continued AI demand, Taiwan’s economic growth could exceed the previously forecast 3.54%, although traditional industries still face low-cost competition from China, requiring the government to strengthen differentiated strategies. For the U.S., this can also serve as a showcase of trade policy achievements, reinforcing the Trump administration’s policy successes.

By ariachiang

2026-01-12

U.S. Preliminary January University of Michigan Consumer Sentiment Rises to 54, a Four-Month High

The University of Michigan released the preliminary January 2026 Consumer Sentiment Index on January 9, which came in at 54, a slight increase from 52.9 in December 2025. This marks the highest level since September 2025 and the second consecutive monthly rebound. The reading was marginally above the market expectation of 53.5, indicating early signs of stabilization in consumer sentiment from depressed levels. Looking at the subcomponents, one-year inflation expectations remained unchanged at 4.2%, while long-term inflation expectations rose from 3.2% to 3.4%, suggesting that cost-of-living pressures remain elevated. The Consumer Expectations Index increased to 55, a five-month high, reflecting improved views on both short-term and medium- to long-term economic prospects. Meanwhile, the Current Economic Conditions Index rebounded from its December low to a three-month high, indicating a modest improvement in assessments of current financial conditions, although overall sentiment remains cautious. These components continue to constrain a stronger recovery in consumer confidence. The main factors weighing on sentiment include: Persistently high living costs, limited job opportunities, and weak wage growth prospects, which continue to suppress consumer confidence. Gradually easing concerns over tariffs, leading to slight improvements in assessments of the business environment and labor market. However, the rebound in confidence has been driven mainly by lower-income households, while sentiment among higher-income households has weakened. Overall, while the January Consumer Sentiment Index slightly exceeded expectations, it remains at relatively low levels, suggesting that the U.S. economy retains a degree of resilience but continues to face unresolved structural pressures. In the short term, with the Federal Reserve maintaining a wait-and-see stance and labor market data becoming clearer, the index is likely to fluctuate around the 55 level. Over the medium term, if inflation continues to ease and tariff policies become more clearly defined, consumer sentiment could improve further. Conversely, a rise in the unemployment rate could lead to a renewed decline toward the 50 level. Read More at Datatrack

By ariachiang

2026-01-09

Fed Rate-Cut Compass: Cooling Inflation and Labor Market Challenges

The U.S. Federal Reserve’s benchmark interest rate is currently maintained at a range of 3.50% to 3.75%, down approximately 15.9 basis points year over year from 4.33%, marking a relatively low level in recent years. Inflation rose 2.7% year over year in December 2025, the lowest since July and below the market expectation of 3.1%. On the labor front, ADP private-sector employment increased by only 41,000 in December. Although this represented a rebound from a revised loss of 29,000 in the previous month, it remained well below the market forecast of 50,000. The unemployment rate held steady at 4.6%, a four-year high. The easing in inflation primarily reflects core inflation of around 2.3%, indicating that the Federal Reserve’s monetary policy has been effective in curbing price pressures, despite energy prices still rising 4.2% year over year. Labor market weakness stems from a pronounced slowdown in hiring and increased layoffs in the second half of 2025. According to ADP data, planned hiring declined 34% year over year, the lowest level since 2010. Fed Governor Milan noted that overly tight monetary policy has constrained economic growth and therefore advocated for a cumulative 150-basis-point rate cut in 2026 to support employment. In the short term, the probability of a rate cut at the Federal Reserve’s January 27–28 meeting stands at only 11.6%. While the median projection among Fed officials points to a single rate cut, investors are pricing in at least two cuts. Over the medium term, if labor data remain weak and inflation stays near 2%, total rate cuts in 2026 are expected to reach 100 to 150 basis points, potentially bringing the benchmark rate down to around 3.4%. Overall market sentiment remains optimistic, though risks include potential data distortions from a government shutdown and policy uncertainties associated with the Trump administration.

By ariachiang

2026-01-08

US December ADP Jobs rebound 41K, Below Expectations

U.S. private sector employment increased by 41,000 in December, rebounding from a revised decline of 29,000 in November. The turnaround suggests early signs of stabilization in the labor market, although the gain still fell short of market expectations of 47,000. This marked the first notable rebound after several months of weak private-sector job growth in the second half of 2025. However, the overall increase remained modest, reflecting a slowdown in cumulative employment growth since the beginning of the year, as hiring sentiment continues to be constrained by a high interest rate environment. Sectoral Breakdown and Structural Insights: Education and health services added 39,000 jobs, while leisure and hospitality increased by 24,000, serving as the primary drivers of job growth. Trade, transportation, and utilities added 11,000 jobs, financial services rose by 6,000, and natural resources, mining, and construction each posted gains of 1,000 jobs. Professional and business services shed 29,000 jobs, information services declined by 12,000, and manufacturing fell by 5,000. Overall, goods-producing industries remained in contraction. By firm size, medium-sized companies led job creation with an increase of 34,000 jobs, followed by small businesses adding 9,000 jobs, while large enterprises recorded only a marginal gain of 2,000 jobs. In terms of wages, annual pay growth for job stayers remained unchanged at 4.4%, while job switchers saw wage growth accelerate to 6.6% from 6.3%, highlighting continued divergence within the labor market. Overall, elevated interest rates continue to weigh on corporate expansion, while cautious consumer spending has weakened demand for professional services and manufacturing labor. Nevertheless, seasonal demand during the year-end consumption period provided some support for service-sector hiring. The recovery in small and mid-sized business hiring suggests relatively manageable cost pressures, whereas large enterprises remain cautious amid heightened economic and policy uncertainty. The labor market continues to exhibit K-shaped divergence, with high-income consumption supporting health and leisure-related industries, while manufacturing remains under sustained pressure. The December ADP report indicates that U.S. private-sector employment has stabilized and rebounded modestly, though growth fell short of expectations, underscoring limited labor market resilience and signaling a potential slowdown in economic growth in 2026. In the near term, employment data are expected to remain moderate, and the Federal Reserve may delay the pace of rate cuts while monitoring inflation trends. This week’s nonfarm payrolls report will be a key indicator to watch. Over the medium term, if hiring momentum remains subdued, the unemployment rate could rise above 4.6%, potentially prompting the Fed to implement one to two rate cuts in the first half of 2026 to support equity and bond markets. However, uncertainty surrounding trade policy is likely to add to market volatility. Read More at Datatrack

By ariachiang

2026-01-07

Japan December Services PMI Slows to 51.6

Japan’s seasonally adjusted Services Purchasing Managers’ Index (PMI) fell to 51.6 in December 2025, down 1.6 percentage points from 53.2 in November, marking the lowest level since May 2025. Although the index remained above the 50 expansion–contraction threshold, indicating that the services sector has stayed in expansion for a ninth consecutive month, the notable decline highlights a clear loss of growth momentum. Compared with the preliminary estimate of 52.5, the final reading was revised lower, reflecting growing market caution toward the outlook for the services sector. Key sub-indices and driving factors: The services activity index declined from the previous month, with growth slowing to its weakest pace since May 2025, primarily due to subdued domestic demand. New order growth also moderated, posting the largest month-on-month decline in nearly seven months. While international demand showed a modest recovery, it was insufficient to offset the drop in domestic orders. Employment growth rose to its highest level since May 2025; however, overall hiring intentions remained cautious, constrained by rising cost pressures. Inflationary pressures intensified, with year-on-year increases in both input and output prices reaching an eight-month high. Rising goods and service prices continued to push up overall cost burdens. Business confidence weakened compared with November, with the decline particularly pronounced in the manufacturing sector, driven by global economic uncertainty, geopolitical risks, and structural challenges such as population aging. Overall, weak demand conditions remain the primary drag on the services sector. The Bank of Japan’s latest Tankan survey also indicates that corporate sentiment toward the three-month outlook has turned more conservative, while consumer willingness to spend has softened amid tariff-related uncertainties. In addition, yen appreciation and ongoing US–China trade frictions have indirectly pressured export-oriented service industries, further dampening new order momentum. Looking ahead, although Japan’s services PMI remained in expansion territory in December, it eased to a seven-month low, underscoring mounting pressure from slowing demand and rising costs. In the near term (1–2 months), services sector growth is expected to continue moderating, with companies likely to maintain cautious hiring strategies. Should the yen continue to strengthen, the risk of further declines in new orders will increase, potentially pushing the composite PMI closer to the 50 threshold. Over the medium term (within six months), a recovery in global economic conditions combined with continued accommodative monetary policy from the Bank of Japan could help stabilize the services PMI above 52. However, persistent geopolitical risks and inflationary pressures will continue to test business confidence, making upcoming January data a key indicator to watch for signs of a directional turnaround. Read More at Datatrack

By ariachiang

2026-01-06

U.S. December ISM Manufacturing PMI Continues to Contract, Hits 14-Month Low

The Institute for Supply Management (ISM) in the U.S. reported that the December Manufacturing Purchasing Managers’ Index (PMI) fell to 47.9, down 0.3 points from November’s 48.2. This marks the 10th consecutive month below the 50-point expansion-contraction threshold, hitting the lowest level in 2025 and a 14-month low. The data indicate that U.S. manufacturing activity is contracting at an accelerated pace. While the overall economy continues to expand, the manufacturing sector has been weak for several months, highlighting significant challenges for the industry. Detailed data performance: New Orders Index: 47.7, slightly up from 47.4 in November, but still contracting for the fourth consecutive month. Production Index: 51.0, down from 51.4 last month, still expanding but at a slower pace. Employment Index: 44.9, up from 44.0 in November, contraction pace slightly eased. Supplier Deliveries Index: 50.8, up from 49.3 last month, indicating slower delivery times. Inventories Index: 45.2, down from 48.9 in November, the fastest decline since October 2024. Prices Index: 58.5, unchanged from last month, with raw material prices rising for 15 consecutive months. New Export Orders: 46.8, up from 46.2 last month, still contracting for 10 consecutive months. Imports Index: 44.6, down from 48.9 last month, contracting for the ninth consecutive month. These figures reflect weak demand, inventory pressures, and trade friction impacts, such as tariffs leading to order declines and supply chain instability. Companies are largely responding with workforce reductions and inventory control strategies to manage uncertainty. Only a few industries, such as computers and electronic products, showed growth, while 15 other sectors, including chemicals, machinery, and transportation equipment, continued to shrink. The December ISM Manufacturing PMI continued to deteriorate, highlighting that U.S. manufacturing is in a downturn, weighed down by weak demand, tariffs, and high interest rates. In the short term (1–2 months), manufacturing is unlikely to escape contraction, with order improvements unclear, potentially weighing on industrial stocks. If the Federal Reserve cuts rates, some relief may emerge. In the medium term (within six months), trade policy uncertainty and geopolitical factors persist, and recovery will depend on stronger demand and policy support. Market volatility may increase, so investors should monitor service sector data for a more balanced perspective. Read More at Datatrack

By ariachiang

2026-01-05

US Nonfarm Payrolls Preview: December Data Signals Labor Market Trends

The U.S. December nonfarm payroll report is scheduled for release on January 9. The market expects an increase of around 55,000 jobs, slightly below November’s 64,000, but still indicating positive growth. The unemployment rate is expected to hold at 4.6% or edge up slightly to 4.7%, continuing the upward trend from November’s 4.6%, which marked the highest level since September 2021, signaling signs of a weakening labor market. Labor data continue to be affected by the Trump administration’s high-tariff policies, as companies remain cautious in hiring amid trade uncertainties and economic slowdown pressures. According to the U.S. Department of Labor’s leading indicators, the four-week moving average of initial jobless claims rose to 218,750, a weekly increase of 1,750, while continuing claims fell to 1.866 million, below market expectations. Although the data indicate that some job seekers are still able to re-enter the workforce, hiring activity remains subdued, impacting confidence in U.S. employment prospects. Additionally, the JOLTS job openings report, due on January 7, is expected to further reflect the cooling trend in labor demand. Inflation has not surged significantly due to tariffs, but related risks have prompted the Federal Reserve to start evaluating the path for future rate cuts. Looking ahead, if December’s nonfarm payrolls fall short of expectations, it could increase the likelihood of a 25-basis-point rate cut by the Fed at the end of January, which would support U.S. stocks and gold. In the medium term, the labor market may remain under pressure, depending on tariff implementation and changes in global demand. Investors are advised to focus on the three core nonfarm indicators—employment change, unemployment rate, and average hourly earnings—to assess overall trends rather than month-to-month fluctuations.

By ariachiang

2025-12-31

Fed Meeting Minutes: December Rate Cut Decision and Economic Outlook

Minutes from the U.S. Federal Reserve’s December 9–10 meeting showed that the target range for the federal funds rate was lowered by 25 basis points to 3.5%–3.75%, marking the third consecutive rate cut in 2025. The minutes indicated that the labor market continues to soften, with the unemployment rate rising in September and job momentum weakening. Employment growth has slowed compared with the previous period and faces further downside risks. On inflation, core goods prices remain elevated due to the impact of tariffs. While most participants expect these pressures to gradually ease over time, some members cautioned that inflation could prove more persistent than anticipated. The decision to cut rates primarily reflected the Committee’s assessment that risks of labor market deterioration have increased. Many participants noted that maintaining a restrictive policy stance for too long could exacerbate job losses, prompting the decision to further ease monetary policy and move rates closer to a neutral level. At the same time, the continued pass-through of tariffs to final goods prices has supported inflation, leading to differing views among participants on the timing and magnitude of inflation moderation. Some officials even favored pausing rate cuts to wait for additional data. In addition, a government shutdown delayed the release of certain employment, inflation, and growth data, forcing the Committee to make decisions based on outdated information and adding to policy uncertainty. Looking ahead, markets expect the Federal Reserve to pause further rate cuts in the near term and reassess economic conditions in the first quarter before considering additional policy adjustments. Two more rate cuts remain possible around mid-year. Over the medium term, if inflation declines as expected, there may still be room for further rate reductions. However, labor market developments and tariff-related uncertainties are likely to be the key drivers of the policy outlook. Overall, the minutes underscore the Federal Reserve’s strong emphasis on employment stability, while inflation risks continue to warrant close monitoring.

By ariachiang