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Business activity in the US was stable in January, as increased demand for new orders was counterbalanced by a weaker labour market and persistent concerns about rising costs tied to import tariffs. At its January meeting, the US Federal Reserve (US Fed) left interest rates unchanged, noting that policy is significantly restrictive and data is mixed. China ended 2025 having met its economic growth target, despite ongoing trade frictions with the US. Meanwhile, the Bank of Japan (BoJ) raised its growth forecast for the fiscal year ending March 2026, while keeping interest rates on hold. The South African Reserve Bank (SARB) maintained interest rates at its January meeting, supported by improving inflation trends and signs of a strengthening domestic economy. The International Monetary Fund (IMF) lifted its 2026 growth forecast for South Africa.

US business activity steady in January

Business activity in the US held steady in January, as stronger demand for new orders was balanced by a soft labour market and ongoing worries about rising costs linked to import tariffs. S&P Global’s flash US Composite PMI Output Index ‒ which measures performance in manufacturing and services ‒ dipped slightly to 52.8 in January from 52.7 in December. Any reading above 50 signals growth in private‑sector activity. Both the services and manufacturing preliminary PMIs showed little movement during the month. S&P Global noted that the composite reading points to a cooling in economic momentum at the start of the year. Government data previously showed that the economy expanded at a 4.4% annualised rate in the third quarter, supported by strong consumer spending and robust investment in intellectual property, probably tied to advances in artificial intelligence, along with a narrower trade deficit.

Source: LSEG Datastream, Reuters

The S&P Global Survey showed that new business orders increased to 52.2 in January from 50.8 in December. However, export demand dropped to its lowest level in nine months due to declines in both goods and services. Business sentiment also weakened, falling slightly below last year’s average. According to S&P Global, many companies are concerned about how higher prices, geopolitical tensions, and federal policies are dampening demand. The survey continued to indicate a stagnant labour market – a trend the firm linked to worries about rising costs and slower sales growth. Its private-sector employment gauge nudged up to 50.5 from 50.3 the previous month. Some firms cited challenges in hiring, which may be connected to stricter immigration measures that economists say have constrained the labour supply.

China’s GDP reaches 5.0% growth despite challenges

China ended 2025 with economic growth aligned with its official target,  a steady finish to the 14th Five‑Year Plan. Data published by the National Bureau of Statistics in January showed that GDP grew 5.0% year‑on‑year (y/y), although domestic demand remained subdued and global conditions were uncertain. For foreign investors, the real importance of the 2025 results lies not in the headline growth rate but in how that growth was generated, as well as the policy implications for the upcoming 15th Five‑Year Plan (2026-2030). While the overall figures point to macroeconomic stability, sector‑level data reveal an ongoing economic shift toward higher‑value manufacturing, the services sector, and external markets.

China’s GDP rose to RMB 140.2 trillion (US$19.6 trillion) in 2025, meeting the government’s target of “around 5%” growth. However, the pace of expansion softened as the year progressed. Quarterly data shows that y/y GDP growth eased from 5.4% in Q1 2025 to 4.5% in Q4 2025, highlighting the diminishing impact of earlier stimulus measures and the continued drag from weak domestic demand.

Source: China Briefing

From a structural standpoint, services were the main engine of China’s economic expansion, growing 5.4% y/y, while industry and agriculture posted more modest increases. The overall pattern ‒ steady but slowing ‒ indicates that policymakers were focusing on stability and risk control rather than aggressive short‑term stimulus as the 14th Five‑Year Plan ended. Industrial output was one of the stronger areas of the economy in 2025. Value‑added industrial production rose 5.9% y/y, with manufacturing outperforming the industrial sector. Equipment manufacturing and high‑tech manufacturing grew more than 9%, well above the national average. Household consumption improved gradually but still fell short of becoming a major driver of growth.

For your interest

  1. US Fed leaves rates unchanged
  • The US Fed kept interest rates steady at its 28 January meeting as expected. The Federal Open Market Committee (FOMC) voted to maintain the benchmark federal funds rate at 3.5-3.75% following three rate cuts in 2025.
  • At his post-meeting press conference, Fed Chair Jerome Powell explained the committee’s decision, stating that it was “hard to look at the data and that policy is significantly restrictive right now”. He expects the Fed will continue to make its decisions on a meeting-by-meeting basis, although our strategists do not anticipate a rate cut until summer.

(Source: J.P. Morgan Wealth Management, January 2026)

  1. US Q3 2025 economic growth revised slightly higher
  • The Commerce Department’s Bureau of Economic Analysis said GDP in the US increased at an upwardly revised ‌4.4% y/y rate in Q3 2025, the fastest pace since Q3 2023.
  • Economists polled by Reuters forecast GDP would be unrevised at 4.3%. The economy grew at a 3.8% pace in Q2 2025. The slight upward revision to growth in the July-September period reflected upgrades to exports and business investment. Imports, which are a subtraction in the ‍calculation of GDP, were revised up. Consumer spending and a smaller trade deficit were the key drivers of GDP growth in Q3 2025.

(Source: Reuters, January 2026)

  1. UK economy grew by a better-than-expected 0.3% in November
  • The UK economy grew by a stronger-than-expected 0.3% in November, despite uncertainty around Chancellor Rachel Reeves’s Budget. According to figures from the Office for National Statistics (ONS), this was an improvement from a 0.1% fall in October 2025.
  • Forecasters expected a more modest 0.1% expansion. The better-than-expected data will be good news for the chancellor, who hopes an economic turnaround will boost the Labour Party’s popularity.

(Source: The Guardian, January 2026)

  1. BoJ upgrades economic growth forecasts
  • The BoJ upgraded its economic growth forecast for the fiscal year ending in March 2026 to 0.9% from 0.7% in October 2025 and raised its GDP expansion outlook for the 2026 fiscal year to 1% from 0.7%. The bank expects Japan’s GDP will grow moderately as other countries return to growth and sees a virtuous cycle of rising prices and wages, supported by government’s economic measures and accommodative financial conditions.
  • The BoJ kept the benchmark interest rate steady in a split 8-1 decision, after raising it to the highest level in 30 years in December, ahead of snap polls that could see Prime Minister Sanae Takaichi sharpen her advocacy for monetary easing and fiscal support.

(Source: CNBC, January 2026)

  1. Q4 2025 GDP up in the Eurozone and EU
  • In Q4 2025, seasonally adjusted GDP increased by 0.3% in both the Eurozone and the EU, compared with the previous quarter, according to a preliminary flash estimate published by Eurostat. In Q3 2025, GDP increased by 0.3% in the Eurozone and by 0.4% in the EU.
  • According to an estimate of annual growth for 2025, based on quarterly seasonally- and calendar-adjusted data, GDP increased by 1.5% in the Eurozone and by 1.6% in the EU. Compared with the same quarter of the previous year, the seasonally adjusted GDP increased by 1.3% in the euro area and by 1.4% in the EU in Q4 2025, after 1.4% growth in the euro area and 1.6% in the EU in the previous quarter.

(Source: Eurostat, January 2026)

  1. SARB keeps interest rates unchanged
  • The SARB’s Monetary Policy Committee (MPC) decided to keep interest rates unchanged at its January meeting, despite encouraging signals in the economy.
  • Growth is expected to accelerate modestly this year, with forecasts pointing to levels well above 1%, a significant improvement from the sluggish average of 0.7% recorded over the past decade. Inflation, meanwhile, averaged 3.2% last year, close to the bank’s new 3% target.

(Source: IOL, January 2026)

IMF raises SA’s 2026 GDP growth forecast

The IMF revised South Africa’s 2026 growth outlook upwards by 0.2 percentage points in its January World Economic Outlook (WEO). It is now projecting economic growth of 1.4% for the year. The IMF kept its forecast for 2027, made last October, unchanged at 1.5%, while the January update indicates that South Africa’s economy probably grew by 1.3% in 2025. These revisions align with the World Bank’s January Global Economic Prospects report and reflect the IMF’s modest improvement in global growth expectations.

Globally, the IMF now anticipates economic growth of 3.3% in 2026 ‒ also a 0.2 percentage point upward adjustment from its October forecast ‒ and maintains its 2027 projection at 3.2%. Global headline inflation is expected to ease from an estimated 4.1% in 2025 to 3.8% in 2026, before moderating further to 3.4% in 2027. While global trade policy shifts present challenges, these are counterbalanced by strong technology-driven investment ‒ particularly in artificial intelligence in North America and Asia ‒ alongside supportive fiscal and monetary conditions, favourable financial environments, and resilience in the private sector. The January WEO also forecasts that economic growth in sub-Saharan Africa will increase from 4.4% in 2025 to 4.6% in both 2026 and 2027. This improvement is attributed to favourable commodity market conditions, economic stabilisation in several countries, and continued reform efforts in key regional economies.

Market overview

Global overview

The year started positively for global equity investors when the MSCI World Index ended January 2026 up 2.24% month-on-month (m/m) in dollars. One-third of S&P 500 companies reported results in January, and three of the US mega-cap tech stocks saw their share prices fall significantly in the wake of their earnings announcements.

Emerging market (EM) equities again significantly outperformed their developed market (DM) peers. The MSCI EM Index gained 8.86% m/m in dollars, largely attributed to the outperformance of semiconductor and mining companies. Geopolitical tensions between Europe and the US over the sovereignty of Greenland added to selling pressure on US government debt, contributing to US dollar weakness.

The FTSE 100’s December gains continued into January, ending the month up 3.08% m/m from 2.19% m/m in pound terms.

The S&P 500’s January gains were 1.44% m/m, compared with December’s 0.06% m/m, both in US dollars. Global bond gains continued into January at 0.94% m/m from December’s 0.26% m/m gains in US dollars. December’s global property negative figure of -1.03% m/m changed to a positive for January at 3.88% m/m in US dollars.

The Euro Stoxx 50 Index gained 2.79% m/m in January from December’s 2.25% m/m gain in euros.

The Dow Jones Index gained 1.80% m/m in December from December’s 0.92% m/m in US dollars, and the Nikkei’s December gains continued into January, ending at 5.93% m/m in yen terms.

Local overview

Momentum on the JSE continued in January, when the local bourse extended a run that has seen it rally 70% over the past two years. The FTSE/JSE Capped All Share index posted gains of 3.72% m/m in rand terms and 7.16% m/m in US dollar terms. Its performance continues to be dominated by precious metal miners. Gains in the Resources sector continued in January, at 12.49% m/m from December’s 5.72% m/m gains. Both Property and Financials continued their gains in January, at 0.98% m/m and 2.97% m/m respectively, in rand terms.

The Industrials sector was negative in January, ending at -0.58% m/m from December’s 4.39% m/m gains. Cash was positive for the month at 0.57% m/m in rand terms and 3.91% in US dollar terms. The local bond market’s gains continued in January for short-, medium-, and long-term bonds.

The FTSE/JSE All Bond Index ended January positively at 1.95% m/m in rand terms. Bonds of 1-3 years were positive at 0.74% m/m, along with bonds of 3-7 years at 1.00% m/m. Bonds of 7-12 years were positive at 1.76% m/m, and bonds of 12 years and above were the biggest gainer for the month at 2.85% m/m. In January, the rand dipped below R16/US$ for the first time in almost four years, before ending the month at R16.15/US$, leaving it 3.32% m/m stronger against a weak US dollar.

The rand also strengthened against the euro by 2.00% m/m, and against the British pound by 1.27% m/m.

 

 

 

 

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