Tuesday Attention on Economic Matters, Not Geopolitics
January 6, 2026
Investors seem to be paying greater attention to economic news such as inflation data, AI news, and comments from central bankers than to the U.S.-powered upheaval in geopolitical norms that has greeted the new year. Yesterday’s U.S. stock market rally carried into Asian trading where share prices this Tuesday closed up 1.6% in Taiwan, 1.5% in China and South Korea, 1.4% in Hong Kong and 1.3% in Singapore, but gains so far in Continental Europe and the United States have bee more measured. The dollar as of mid-morning in New York had posted gains ranging from 0.1-0.3% against the euro, yen, Swissy, and loonie. In contrast to a 1-basis point uptick in the 10-year U.S. Treasury and Japanese JGB yields, comparable notes have fallen by three basis points in Germany, France and the U.K. and four bps in Italy and Spain. Gold and silver prices, respectively up another 1.1% and 4.8%, continue to storm upward, while oil has stayed steady and below the $60 per barrel threshold.
Inflation news has been mixed. Actual price data releases have exhibited disinflationary tendencies.
- Germany’s preliminary estimated consumer price inflation rate fell by a greater-than-forecast extent to 1.8% in December from 2.3% in the prior two months and 2.6% in December 2024. This was the lowest reading since a cyclical trough of 1.6% fifteen months earlier and far below the high of 8.8% touched in October and November of 2022. A lot of last month’s disinflation stemmed from energy (-1.3%) and food. A third straight service price reading of 3.5% versus 3.1% last July-August remains worrisome, however.
- French CPI inflation is even further below the ECB target than Germany’s, recording a 7-month low of 0.8% in December after readings of 1.2% last September and 0.9% in both October and November.
- British shop prices were only 0.7% above their year-earlier level in December, half as much as the 1.4% pace in September.
- In the Philippines, consumer prices in November were only 0.1% above the year-earlier level.
- On the other hand, the service price sub-index in today’s release of Euroland’s latest composite and service sector purchasing manager surveys point to strengthening input price pressure.
- And Richmond Federal Reserve District President Tom Barkin succinctly expressed the reservation of several U.S. monetary policymakers against blindly doing President Trump’s bidding. “With inflation above target now for almost five years, no one wants higher inflation expectations to get embedded.”
A big takeaway of the inflation upsurge that ultimately was conquered by former Fed Chairman Paul Volcker is that expected inflation plays a critical role in steering actual inflation. Double-digit U.S. inflation that mired the Carter Presidency in the late 1970’s and required a draconian monetarist clamp-down on money growth that resulted in a double-dip deep recession in the early 1980’s actually had its genesis more than a decade earlier. The upturn of inflation between 1966 and 1980 didn’t happen in a linear fashion but rather in a series of waves. Under the prior stewardships of Fed Chairmen Burns and Miller, monetary policy was loosened prematurely when each wave crested and before expectations of future price stability were allowed to restore themselves.
Non-oil purchasing manager indices in Egypt and the United Arab Emirates slid back from respective 61- and 8-month highs in November of 51.11 and 54.8 to two-month lows of 50.2 and 54.2 in December.
Having crested at 50.8 last May, the S&P Global-compiled South African PMI index fell 1.3 points in December to an 11-month low of 47.7.
Hong Kong’s private PMI fell from a 22-month high in November to a 2-month low of 51.9 last month. Singapore’s December reading of 54.1 remained comfortably above the 50 level than divides improving conditions from deterioration territory but was at a 4-month low and 1.3 points lower than in November.
The Australian composite and service sector PMI readings of 51.0 and 51.1 in December were their lowest readings in 7 months and well below August highs that of 55.6 and 55.8.
India’s still has a comparatively robust economy, but some momentum has been lost since the composite and service PMIs peaked last August at 63.8 and 62.9. December’s final estimates of 57.8 and 58.0 were each revised below preliminary figures and at 11-month lows.
Euroland’s December composite purchasing managers index was also revised downward and, at a a 3-month low of 50.3, implied a big loss of momentum compared to November when a 31-month high of 53.8 was registered. Only Spain’s 55.6 reading was above it’s November result. The Irish composite PMI slipped to a 3-month low of 53.6. Germany’s 51.3 score was down from 52.4 and at a 4-month low. Italy’s 50.3 following 53.8 in November was at an 11-month low, and the French composite survey conveyed neither positive nor negative growth with a 2-month low of 50.0. Euroland’s service sector PMI of 52.4 was down from 53.6 and its lowest reading since September.
British PMI readings for all private activity and the service sector only each printed at 2-month highs of 51.4 in December.
The S&P Global U.S. composite and service sector purchasing manager indices were each lower than forecast. At 52.7 and 52.5, they represent the slowest expansion rates in 8 and 6 months, respectively.
Copyright 2026, Larry Greenberg. All rights reserved.
Tags: composite and service sector PMI readings in December 2025, German and French consumer prices
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