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962 matches for " April":
Hideous though the official April payroll numbers were, the chances are that they'll be revised down.
In one line: April's total halt in activity will be followed by an incomplete recovery.
In one line: A total collapse in April, but tentative signs of recovery in other timelier data.
CPI inflation took a big step in April towards the near-zero rate we anticipate by the summer.
Today's April ADP employment report likely will understate the scale of the net payroll losses which will be reported Friday by the BLS.
It would be astonishing if the May and June payroll numbers looked much like April's strong data, at least in the private sector.
In one line: April consumption no more disastrous than expected.
The April FOMC statement dropped the March assertion that "global economic and financial developments continue to pose risks" to the U.S. economy, even though growth "appears to have slowed". Instead policymakers pointed out that "labor conditions have improved further", perhaps suggesting they don't take the weak-looking March data at face value. We certainly don't.
Japan's main activity data for April were massively disappointing, presaging the sharper GDP contraction we expect in Q2, compared with Q1.
In one line: The EZ trade surplus evaporated in April.
China's money data continued to improve in April, bolstering the economy's recovery prospects.
April's GDP report probably will be the worst any of us will see in our lifetime.
CPI inflation dropped to 2.4% in April, from 2.5% in March, undershooting the no-change consensus and prompting many commentators to argue that the chances of an August rate hike have declined further.
The 0.1% dip in the core CPI in March was the first outright decline in three years, but we expect another-- and bigger--decline in today's April numbers.
April's consumer prices report, released on Wednesday, likely will show that CPI inflation plunged and is heading quickly to a near-zero rate by the summer.
China's export data for April were a mixed bag, to say the least.
In one line: More evidence of momentum in the household sector.
In one line: Still implausibly strong.
In one line: Resilient wage growth bolsters the case for rate hikes.
In one line: Flat for six months, but modest growth likely ahead.
In one line: Back to normal.
In one line: Patience persists.
In one line: Disappointing but a rebound is coming.
In one line: Further declines unlikely, but signals slower payroll gains
In one line: Solid; AHE hit be calendar quirks and will rebound.
In one line: Overstates the trend, but also raises the chance of a big official print Friday .
In one line: Households aren't fazed by the political crisis.
In one line: Drop almost entirely due to a reversal of the pre-Brexit stockpiling boost.
In one line: Too soon to take fright from the slowdown in tax receipts.
In one line: Slowing, but not as sharply as we had feared.
In one line: Terrible, but this likely will be the bottom.
In one line: Another signal of feeble economic activity
In one line: Extremely ugly, but this likely will mark the floor.
In one line: Brazil inflation is well under control.
In one line: A sharp increase on the month, but underlying pressures remain tame.
In one line: Terrible data, and the near-term outlook is grim.
In one line: Ignore the un-adjusted headline; production did well at the start of Q2.
In one line: Grim, due to Covid-19, but a modest recovery likely will emerge in Q3.
In one line: Poor, growth slowed rapidly in Q2.
In one line: A good start to the second quarter but downside risks remain.
In one line: An inevitable pull-back after Q1's pick-up.
In one line: Better, but still an incomplete recovery.
In one line: Stagnation signal should be disregarded, again.
In one line: Sub-par, once the Easter effect is excluded.
In one line: Resilient in the face of heightened political uncertainty.
In one line: A modest deterioration of the labour market but the real pain is around the corner.
In one line: Inflation still little source of concern.
In one line: Still dormant, despite the Brexit delay.
In one line: Downside surprise due to unsustainably low core goods inflation.
In one line: Starts have further to rise, given the rebound in new home sales.
In one line: Details are wose than the consensus-beating headline.
In one line: This is the bottom; expect a big rebound in May.
In one line: Horrible, and consumer confidence likely has further to fall.
In one line: Calamitous, but the core won't keep falling at this pace.
In one line: Grim, but no worse than implied by other data.
In one line: We're all epidemiologists now.
In one line: More QE needed to facilitate record-high borrowing.
In one line: A collapse that reverses nearly 15 years of growth.
In one line: Terrible, but not really news.
In one line: Terrible, but could have been worse.
In one line: Terrible, but could have been even worse.
In one line: Catastrophe, enumerated.
In one line: Bottoming-out.
In one line: The intensity of the immediate downward shock to prices won't persist.
In one line: Worst month ever, but this is the floor.
In one line: Horrendous.
In one line: A huge hit, but not a record low.
In one line: The details are significantly worse than the headline.
In one line: Expect the rebound to start in May.
In one line: Housing construction likely has hit bottom.
In one line: Worse to come in housing; Philly Fed near the bottom.
In one line: Cash positions were built up rapidly heading into the crisis.
In one line: The wall of cash should limit near-term corporate insolvencies.
In one line: The rebound is consolidating; expected steady spring/summer sales.
In one line: A correction; the trend is rising
In one line: Core PCE deflator back on track; Q2 consumption headed for 3%.
In one line: Recent declines in y/y rates for core goods and services won't continue.
In one line: Little sign of the feared trade hit on Q2 GDP growth, so far.
In one line: Calendar quirks explain the drop in manufacturing output; expect a rebound in May.
In one line: The core capex picture is deteriorating.
In one line: Disappointing, but the trend is turning higher.
In one line: A soft start to Q2, following an ugly Q1.
In one line: The way back will be much slower than the descent.
In one line: Still reflecting the pre-Covid world.
In one line: In suspended animation due to the CJRS; the true damage from COVID-19 will emerge in the autumn.
In one line: Ignore the headline numbers; claimant count and vacancy data show the Covid-19 pain.
In one line: A total collapse.
In one line: An unprecedented collapse.
In one line: Pointing to zero CPI inflation by the summer.
In one line: A big leap towards zero by the summer.
In one line: Overall stagnation masks sub-sector divergence.
In one line: A huge decline, but timelier data point to a tentative recovery in May.
In one line: Stalled; expect a slow restart.
In one line: Details indicate that downside pressure is much less than headlines suggest.
In one line: A marginal improvement, but poor mining activity remains a drag.
In one line: Grim, but more-or-less as expected.
In one line: On point, and on target.
In one line: Did the ECB just revive the bank-carry trade in government bonds?
In one line: Terrible, but more-or-less as expected.
In one line: Looks logical, but no clear picture until June, at the earliest.
In one line: Hit by fall in the trade surplus; portfolio outflows remain modest.
In one line: The Eurozone was a bit better than the EU 28, but still poor overall.
In one line: No sales when showrooms are closed.
In one line: Weak, and Q2 as a whole likely will be bleak.
In one line: Dreadful, but also old news.
In one line: The EZ will soon be in deflation, temporarily.
In one line: Every bit as terrible as feared.
In one line: Ugly services PMIs in Spain and Italy, but they should recover next month.
In one line: Ugly, but everyone is looking ahead to the rebound.
In one line: Nasty.
Private consumption in Japan will take time to recover, even if some semblance of normality returns from this month.
In one line: Still weak, but a few signs of improvement.
In one line: Core inflation remains subdued, but it will rise soon.
In one line: Falling, rapidly.
In one line: Old news, but spectacular details all the same.
In one line: Deteriorating, fast.
In one line: Not pretty, but short-time work schemes are preventing some permanent layoffs.
In one line: A grim start to Q2, as developed world demand collapses
In one line: The BoJ is doing all it can to support the economy
In one line: A supply-demand mismatch
In one line: Hit from oil has just started; deflation is imminent.
We take little comfort from the fact that the 2.0% quarter-on-quarter drop in Q1 GDP was a bit smaller than the consensus forecast, 2.5%, and the 3.0% fall pencilled-in by the MPC in its Monetary Policy Report.
At first glance, the latest labour market data appear to be contradictory.
Japan's all-industry activity index dropped by 3.8% month-on-month in March, worse than the 0.7% slip in February.
Across all the major economic data, perhaps the biggest weather distortions late last year and in the early part of the year were in the retail sales numbers, specifically, the building materials component. Sales rocketed at a 16.5% annualized rate in the first quarter, the biggest gain since the spring of 2014, following a 10.2% increase in the fourth quarter of last year.
The collapse in global demand last month will have derailed China's trade recovery, causing exports to drop unpleasantly month-on-month after the bounce of around 45% in March; the January/February breakdown is not provided, so we can't be sure of the extent of the March rebound.
In one line: Lockdowns in Europe and the U.S. knock out exports
In one line: A devastating services report, but we see light at the end of the tunnel in manufacturing
In one line: Easter distortions drove services inflation higher; the core goods CPI is still subdued
In one line: Stung by a collapse in energy inflation, but the core rate dipped too.
In one line: Welcome to the house of horror.
In one line: A big hit, but the trend looks unmoved.
In one line: Commodity prices continue to pummel Chinese PPI.
In one line: Just a valuations drag; net capital outflows up modestly
In one line: Banks continue to toe the line
In one line: Post-lockdown momentum intact, just
In one line: Robust, but base effects are challenging for manufacturing in Q2.
In one line: Not terrible, but outlook for Q2 as a whole is grim.
In one line: China's smaller TMLF injection means the facility has been superseded, while interbank rates already are low
In one line: A big leap towards zero by the summer.
In one line: Calamitous, but the core won't keep falling at this pace.
In one line: Solid; AHE hit be calendar quirks and will rebound.
In one line: Housekeeping; further easing to come
In one line: Ugly, but everyone is looking ahead to the rebound.
In one line: Another hefty cut as the economy is heading for a deep recession.
In one line: The BoJ is doing all it can to support the economy
In one line: Every bit as terrible as feared.
In one line: Catastrophe, enumerated
In one line: Inflation pressures easing sharply; consumers were struggling even before the virus.
In one line: Worst monthly contraction ever, but it soon will hit the floor.
In one line: A weak-looking report but hit by calendar effects; capex will stabilise as uncertainty fades.
In one line: Grim, and more pain is coming.
In one line: An ugly start to the second quarter, despite a modest improvement in sectoral data.
In one line: Terrible, but a gradual upturn likely will emerge in late Q2.
In one line: A bad-looking start to Q2, but the y/y rate was hurt by an unfavourable base effect.
In one line: Low oil prices and the recession push inflation down to cyclical lows.
In one line: Modest inflation pressures amid subpar economic activity.
In one line: A bold rate cut, and more action is coming.
In one line: Not pretty, but short-time work schemes are preventing some permanent layoffs.
In one line: Robust, despite marginal dip in M1 growth.
In one line: Very positive.
In one line: Disappointing, but online sales will rebound next month.
In one line: Ugly, but also the bottom.
In one line: Held up by soaring inflation expectations.
In one line: Terrible, but the worst is over.
In one line: Terrible, but not worth dwelling on.
In one line: Terrible; now we wait for the rebound.
In one line: Back to reality?
In one line: Ouch; but these data often swoon.
In one line: Ugly, but much better than we had feared.
In one line: All over the place, but a good snapshot of investors' hopes and dreams.
In one line: Easter distortions drove services inflation higher; the core goods CPI is still subdued.
In one line: Welcome to the house of horror.
In one line: Bad, but it would have been disastrous without Kurzarbeit.
In one line: Ignore.
In one line: A plunge in energy inflation, and probably a dip in the core rate
In one line: Encouraging rebound in expectations, to too soon to cheer.
In one line: The trade deficit is unmoved, but volumes have collapsed.
In one line: Soft industrial data, and external conditions for EM economies are becoming increasingly challenging
In one line: Even worse than it looks, but no worse than should be expected.
April's RICS Residential Market survey confirmed that housing market activity collapsed to negligible levels during the lockdown, which prohibited property viewings, depleted the work forces of lenders and prompted many people to defer big financial decisions.
Core machine orders in Japan collapsed in April, as expected, falling by 12.0% month-on-month, worse than the minor 0.4% slip in March.
Yesterday's data provided further evidence of the EZ economy's response to the Covid-19 shock, though we recommend that investors take the numbers with a pinch of salt. In Germany, the final CPI report for April showed that headline inflation slipped to 0.9% year-over-year, from 1.4% in March, trivially above the first estimate, 0.8%.
A decade of public deficit reduction was fully reversed in April, as the coronavirus tore through the economy.
The two marquee economic reports today, covering May retail sales and industrial production, will capture the initial rebound after the economy hit bottom sometime in mid-April.
Retail sales in Japan rose modestly in May, after collapsing in March and April, as the government tried to put a lid on the country's Covid-19 outbreak.
This week's labour market report--primarily reflecting conditions in March, though some data refer to April--will lift the veil on the initial economic damage from Covid-19, though the full horror will emerge only later.
Mexico's industrial recession deepened in April, though some leading indicators suggest that the worst is over as the economy gradually reopens. But downside risks have increased dramatically in recent weeks, as the pandemic seems to be gathering renewed strength.
The downturn in Japan's all-industry activity index slowed in May to -3.5% month-on-month, from April's significantly revised 7.6% plunge.
April's money and credit figures show that relatively few firms suffered from a lack of liquidity at the beginning of the Covid-19 crisis.
Friday's manufacturing data in Germany weren't pretty, but fortunately, the report is old news. Factory orders crashed by 25.8% month-to-month in April, extending the slide from a revised 15.4% fall in March.
The stock of bank lending to businesses is on course to fall in June, after a modest increase in May and huge jumps in March and April.
Japan's Tankan survey for Q2 was unsurprisingly grim, given the devastation caused by the near- global lockdown in the first half of the quarter, and the nationwide state of emergency that enveloped April and May.
ADP's measure of May private payrolls undershot the official estimate by 5.6 million, surprising everyone after it nailed the April catastrophe.
The May auto sales numbers probably will be released just after our deadline at 4pm eastern time today, but all the signs are that a hefty rebound will be reported after April's plunge to just 8.6M, not much more than half the pre-Covid level.
We expect May's consumer prices report, released on Wednesday, to show that the headline rate of CPI inflation fell to a four-year low of 0.4% in May, from 0.8% in April.
At their March meeting FOMC members' range of forecasts for the unemployment rate in the fourth quarter of this year ranged from 4.4% to 4.7%, with a median of 4.5%. But Friday's report showed that the unemployment rate hit the bottom of the forecast range in April.
Many investors probably will be scratching their heads in the wake of next week's labour market report, which will reveal the Covid-19 hit to employment and wages in April, as well as showing how much further the claimant count soared in May.
Korea's unemployment rate rose faster than expected in May, jumping to 4.5%, from 3.8% in April. We've been arguing for some time that the delayed impact of the economic growth slowdown from late- 2017 to early-2019 would eventually push the jobless rate to the mid-4% level this year; the sudden stop caused by Covid-19 merely sped up this process.
China's two-tier post-lockdown economic revival continued in April. Industrial production beat expectations easily, rising by 3.9% year-over-year, after slipping by 1.1% in March.
Korea's unemployment rate was unchanged in April, at 3.8%, beating even our below-consensus forecast for only a minor uptick, to 3.9%.
The FOMC kept policy unchanged at April's meeting-- rates stayed at zero, and all the market valves are wide open, as needed--but policymakers spent considerable time pondering what might happen over the next few months, and how policy could evolve.
Yesterday's final CPI report for April confirmed that the Eurozone is edging towards deflation.
India's shocking PMIs for April leave little doubt that the second quarter will be bad enough to result in a full-year contraction in 2020 GDP, even if economic activity recovers strongly in the second half.
The entire 10.5% increase in personal income in April, reported on Friday, was due to the direct stimulus payments made to households under the CARES Act.
Friday's economic data in the Eurozone provided further evidence of a sharp rebound in manufacturing output as the economy reopened. Industrial production in France jumped by 19.6% month-to-month in May, lifting the year-over-year rate to -23.4% from -35.0% in April.
Japan's export data for April unsurprisingly were abysmal, driving a massive deterioration in the trade balance, which flipped from a modest ¥5B surplus in March, to a ¥930B deficit.
The record 0.4% drop in the core CPI in April would have looked even worse had it not been for favorable rounding; it was just 0.002% away from printing at -0.5%.
The drop in CPI inflation to 0.5% in May, from 0.8% in April, brought it another big step closer to the near-zero rate we foresee in the second half of this year.
Korea's manufacturing PMI fell for a fourth straight month in April, dropping to 41.6, which is the lowest reading since January 2009.
The year-over-year collapse of industrial production in India eased substantially in May, to -35%, from -58% in April, close to our -32% forecast.
Our judgement that April was the low point for economic activity was challenged yesterday by the publication of results of the fifth wave of the Business Impact of COVID-19 Survey, conducted by the ONS between May 4 and 17.
Friday's final June PMI data confirmed the survey's recovery through Q2. The composite index edged higher to 48.5, from 31.9 in May, extending its rebound from a low of just 13.6 in April.
April's GDP report, released on Monday, likely will add fuel to the fire of the re cent sharp decline in interest rate expectations.
April's consumer price figures, due on Wednesday, are set to show that CPI inflation has fallen, primarily due to the earlier timing of Easter this year than last. We
Yesterday's PMI data in the euro area were a horror show. The composite EZ index cratered to 13.5 in April, from 29.7 in March, dragged down by a collapse in the services index to 11.7, from 26.4 last month.
Industrial profits in China dropped 3.7% year-over- year in April, after surging 13.9% in March, according to the officially reported data.
April payroll growth likely will be reported at close to 200K. Overall, the survey evidence points to a stronger performance, but they don't take account of weather effects, and April was a bit colder and snowier than usual. We're not expecting a big weather hit, but some impact seems a reasonable bet.
CPI inflation rose only to 2.1% in April, from 1.9% in March, undershooting the 2.2% consensus and MPC forecasts, as well as our own 2.3% estimate.
The EZ economic survey data for April were disappointing in our absence.
Eurozone inflation pressures snapped back in April. Friday's advance report showed that headline inflation rose to 1.9% year-over-year, from 1.5% in March, lifted by a jump in the cor e rate to 1.2% from 0.7% the month before.
Korean exports continued to fall year-over-year in April, but the story isn't as bleak as the headlines suggest.
A robust April payroll number today is a good bet, but a gain in line with the 275K ADP reading probably is out of reach.
The Markit/CIPS manufacturing PMI shot up to a three-year high of 57.3 in April, from 54.2 in March, bringing an end to the run of downbeat news on the economy. The performance of the U.K. manufacturing sector, however, remains underwhelming, given the magnitude of sterling's depreciation.
Yesterday's industrial production report in Brazil was sizzling. Headline output jumped 0.8% month- to-month in April--well above the 0.4% consensus-- pushing the year-over-year rate up to 8.9%, a five- year high.
We were a bit surprised to see our forecast for the April trade deficit is in line with the consensus, $44B, down from $51.4B in March, because the uncertainty is so great. The March deficit was boosted by a huge surge in non-oil imports following the resolution of the West Coast port dispute, while exports rose only slightly. As far as we can tell, ports unloaded ships waiting in harbours and at the docks, lifting the import numbers before reloading those ships.
April's impressive-looking retail sales numbers--the headline jumped 1.3%, with non-auto sales up 0.8%--were boosted by two entirely separate factors, one of which will play no p art in May and one which will offer very modest support. The key lift in April came from the very early Easter, which confounded the seasonal adjustments, as it usually does.
April's retail sales figures, due Thursday, likely will show that spending recovered from snow-induced weakness in March.
Don't expect a pretty picture when Korea's Q1 GDP report appears in the last week of April.
The undershoot in the April core CPI wasn't a huge surprise to us; the downside risk we set out in yesterday's Monitor duly materialized, with used car prices dropping by a hefty 1.6% month-to-month, subtracting 0.05% from the core index.
The gap between the hard and soft data from the industrial economy appeared to widen still further last week. But we are disinclined to take the data--the official industrial production report for March, and the first survey evidence for April--at face value.
We see downside risk to the housing starts numbers for April, due today. Our core view on housing market activity, both sales and construction activity, is that the next few months, through the summer, will be broadly flat-to-down.
Chinese April retail sales growth slowed sharply in value terms, to 9.4% year-over-year, from 10.1% in March.
April's 2.0% month-to-month leap in industrial production was the biggest upside surprise on record to the consensus forecast, which predicted no change. The surge, however, just reflects statistical and weather-related distortions. These boosts will unwind in May, ensuring that industry provides little support to Q2 GDP growth. Make no mistake, the recovery has not suddenly gained momentum.
French manufacturing confidence soared at the start of Q2. The headline INSEE index jumped to a six-year high of 108 in April, from an upwardly revised 105 in March. The headline was flattered by a big increase in the "past activity" index, but the survey's leading indicators also improved.French manufacturing confidence soared at the start of Q2. The headline INSEE index jumped to a six-year high of 108 in April, from an upwardly revised 105 in March. The headline was flattered by a big increase in the "past activity" index, but the survey's leading indicators also improved.
Official industrial production growth in China plunged to 5.4% year-over-year in April, from 8.5% in March.
The April IFO business sentiment survey increased the degree of uncertainty over the German economy, following stabilisation in the PMIs earlier this week.
Eurozone investors will be drawing a sigh of relief after yesterday's PMI data. The alarming plunge in February and March made way for stabilisation, with the composite PMI in the euro area unchanged at 55.2 in April.
Japan's manufacturing PMI rose to 53.3 in April, from 53.1 in March. The index weakened earlier this year, but remained at levels unjustified by the hard data.
Mexico's private spending stumbled at the start of the second quarter. Retail sales fell 0.3% month-to-month in April after three consecutive increases, hit by an unexpected 1.6% drop in both supermarket and apparel sales, and a surprising 1.2% fall in food sales. In year-over-year terms, total sales rose 4.6% in April, down from 5.6% in March.
As warned--see our Monitor April 7--economic data in the Eurozone disappointed while we were away. Industrial production, ex-construction, in the euro area slipped 0.3% month-to-month in February, and the January month-to-month gain was revised down by 0.6 percentage point to +0.3%.
We are not worried about the reported drop in April manufacturing output, which probably will reverse in May.
The underlying state of the Mexican economy is still positive, despite recent signs of a modest slowdown. The IGAE economic activity index--a monthly proxy for GDP--rose 2.1% year-over-year in April, a relatively solid pace, but down from 2.8% in March, and 2.6% in Q1.
We see significant upside risk to today's headline durable goods orders numbers for April.
Retail sales volumes jumped by 2.3% month-to-month in April, exceeding the 1.0% consensus and even our 2.0% forecast. It would be a big mistake to conclude, however, that households' spending will propel the economy forward this year like it did between 2013 and 2016.
The 10.3% year-over-year decline in private new car registrations in April likely is not a sign that the trend in either vehic le sales or consumers' overall spending is taking a turn f or the worse.
April's GDP data give a grim firs t impression, though the details provide reassurance that the economy isn't on the cusp of a recession.
A casual glance at our char t below, which shows the number of job openings from the JOLTS report, seems to fit our story that the slowdown in payrolls in April and May--perhaps triggered by the drop in stocks in January and February--will prove temporary. Job openings dipped, but have recovered and now stand very close to their cycle high.
We expect April's consumer price figures, due on Wednesday, to show that CPI inflation leapt to 2.3%, from 1.9% in March, exceeding the MPC's 2.2% forecast in the latest Inflation Report.
April's consumer price figures, released on Tuesday, look set to reveal that CPI inflation jumped to 2.7%--its highest rate since September 2013--from 2.3% in March. Inflation likely will be driven up entirely by a jump in the cor e rate to 2.3%, from 1.8% in March.
Total job losses between the March and April payroll survey weeks, as captured by the weekly jobless claims numbers, soared to 26.7M.
April's production data, released today, look set to indicate that the industrial sector's recession--its third in the last eight years--deepened in the second quarter. We think the consensus expectation that industrial production held steady in April is too upbeat. We look for a 0.3% month-to-month drop.
News yesterday that exports surged to a record high in April was leapt on as "evidence" that sterling's Brexit-related weakness already is having positive side-effects and that therefore the economy would be relatively unscathed by a Brexit. However appealing this explanation may sound, it is nonsense.
April's Retail Sales Monitor from the British Chambers of Commerce, released yesterday, provided a powerful signal that households' spending rebounded in April, following a terrible Q1.
Another day, another couple of April reports likely to reverse March "weakness", triggered by the early Easter. We look for robust core durable goods and pending home sales reports, with the odds favoring consensus-beating numbers. In both cases, though, the noise-to-signal ratio is quite high, and we can't be certain the Easter seasonal unwind will be the dominant force in the April data.
The gap between the official measure of the rate of growth of core retail sales and the Redbook chainstore sales numbers remains bafflingly huge, but we have no specific reason to expect it to narrow substantially with the release of the April report today.
Chief U.S. Economist Ian Shepherdson on U.S. Housing starts
Chief U.K. Economist Samuel Tombs on U.K. House Prices
Chief US Economist Ian Shepherdson on today's Inital Jobless Claims data
Yesterday's big news in the Eurozone was the EU Commission's proposed recovery fund.
Mexican policymakers yesterday voted unanimously to cut the policy rate by 50bp to 5.00%, the lowest level since late 2016.
While we were out, new U.S. Covid-19 cases and hospitalizations continued to fall steadily, and deaths have now peaked.
Unconventional indicators of economic activity suggest that the recovery from the Covid-19 shock is gathering momentum.
Recent estimates of public borrowing have undershot the OBR's expectations, superficially suggesting the Chancellor has greater-than- expected capacity to borrow even more in the winter, if Covid-19 wreaks havoc.
Yesterday's detailed Q2 GDP report in Germany confirmed that economic output nosedived during lockdown, but also showed that the economy was resilient compared to the rest of the EZ.
The headline May durable goods orders numbers today probably will look very strong, with the odds favoring a much bigger increase than the 10.1% consensus; we'll come back to that.
The extent to which the Covid wave in the South and West--plus a few states in other regions--will constrain the recovery is unknowable at this point.
Don't be alarmed by the second straight jump in consumers' inflation expectations, captured by the Conference Board's May survey, reported yesterday.
Data released yesterday in Brazil support our base case that the IPCA inflation rate will remain relatively stable over the coming months, hovering around 2%.
June's surge in retail sales is not a sign that households' total spending is zipping back to pre- downturn levels.
The official data lag developments in the real economy even at the best of times, but on this occasion the gap has turned into a chasm.
The early damage in India from Covid-19 and the nationwide lockdown likely was significant enough to hammer the GDP report for the first quarter, due tomorrow.
If Congress passes another Covid relief bill early next month, as we fully expect, it will have to be financed quickly via increased debt issuance.
With just five days of July remaining, it seems likely that the trends in most of the key near-real-time indicators will end the month close to the levels seen at the end of June.
Britain's Covid-19 data have continued to improve, despite the partial reopening of the economy.
Korea's GDP report for the second quarter was a huge let-down.
Korea's economy is shaping up largely in line with our expectations for the second quarter, with private consumption recovering, but exports and investment tanking.
India's services PMI for June underscores the half-hearted nature of Unlock 1.0, with the daily number of new cases of Covid-19 still rocketing.
The final Monitor before our summer break is characterized by great uncertainty.
Recent economic indicators in Mexico have been terrible. The worst of the recession seems to be over, but recent hard data have underscored the severity of the shock and made it clear that the recovery has a long way to go.
The government will have no choice but to introduce fresh nationwide curbs on economic activity before long, if the current steep upward trend in Covid-19 infections is sustained.
The rate of increase of Covid-19 new cases in the Andes is still rapid, but it seems to have peaked in recent days in most countries.
Emerging evidence suggests that the economy has passed the period of peak Covid-19 pain.
Efforts to contain the coronavirus outbreak severely dented industrial activity in Brazil.
We're very comfortable with the idea that the coronavirus is a broad deflationary shock to the U.S. economy.
The recent March economic activity reports for Chile have been terrible, showing the first signs of the Covid-19 shock, and worse is to come.
Services will bear the brunt of the Covid-19 shock in the euro area, but manufacturing is not far behind.
The surge in the broad money supply in March, as the U.K.'s lockdown began, suggests that businesses are in relatively good shape to survive a multi-month period of greatly depressed demand.
Let's get straight to the point: It's very unlikely that July's payroll numbers will be as good as June's. Too many direct and indirect indicators of employment and broader economic activity are now moving in the wrong direction.
It is becoming increasingly safe to say that any bounce in private consumption following the end of Japan's state of emergency will be muted and difficult to sustain.
China's post-Covid-19 economic recovery is becoming increasingly undeniable. But the more relevant questions now are the speed of its revival, and whether there are still any low-hanging fruit to pick.
On the surface, the EU's joint stimulus efforts are progressing nicely.
The coronavirus outbreak has pushed inflation lower in the Andean economies as the shock drives them into the deepest recession on record.
Next week's labour market report likely will show that job cuts accelerated again, after a lull in the summer.
In one line: A further jump in expectations; can it be trusted?
In one line: The recovery from the Q4 stock market hit continues apace.
China's trade surplus jumped to a record high in May, defying expectations for a fall by spiking to $69.2B.
The immediate impact of the Covid-19 crisis on the auto market was calamitous.
The single most surprising U.S. economic report ever published likely is explained very simply: We know a great deal about the numbers of people losing jobs, but not much about people finding jobs.
So far, the MPC has been more timid with unconventional stimulus than other central banks. At the end of May, central bank reserves equalled 29.7% of four-quarter rolling GDP in the U.K., compared to 32.7% in the U.S. and 46.7% in the Eurozone.
Yesterday's data seemed to pour cold water on the idea of a sustained recovery in German manufacturing. Industrial production, including construction, fell by 0.2% in August driving the year-over-year rate down by 0.4pp, to -10.0%.
If you had predicted at the start of the year that the ECB balance sheet would leap by just over €1.5T in H1, you would have been laughed out of the room.
We set out the reasoning behind the big upward revision to our payroll forecast yesterday, in the wake of the much better-than-expected ADP report.
The ECB took another big step yesterday in assuring markets that it won't waver in the fight against Covid-19.
We're expecting ADP today to report a 10M drop in private payrolls in May, but investors should be braced for surprises, in either direction, because ADP's methodology is not clear.
The end of Korea's first Covid-19 wave, coupled with the government's economic support measures, has been a boon for the retail industry.
Chile's near-term economic outlook is still negative after a sharp resurgence of coronavirus cases.
China's loan prime rates were unchanged for a second straight month in June, as expected.
The wild gyrations in the core inflation numbers in recent months have made it hard to keep track of the underlying story.
Our latest round-up of the key near-real-time data is not encouraging.
We were expecting the pandemic in the Andes to reach a plateau over the coming weeks, given the quick response of regional governments to fight the virus.
Investors active in the government bond market will be awaiting today, at 07:30 BST, the publication by the Debt Management Office of its updated Financing Remit for the upcoming three months. The new Remit will show that gilt sales, net of redemptions, will be lower in Q3 than in Q2.
We learned yesterday that the patchy but widespread reopening of the economy is triggering the first wavelet of rehiring.
The Monetary Policy Board of the Bank of Korea yesterday voted unanimously to lower its base rate by 25 basis points to a record low of 0.50%.
For now, the U.K. government still insists that the Brexit transition period will end in December, regardless of whether a new trade deal has been negotiated with the E.U. or not.
The recovery of consumer confidence in Korea remains undeterred by the lingering risk of a second wave.
The Fed made no changes to policy yesterday, as was almost universally expected.
The ECB will leave its key refinancing and deposit rates unchanged today, at 0.00% and 0.5%, respectively, but we are confident that the central bank will expand its existing stimulus efforts via a boost and extension of the Pandemic Emergency Purchase Program.
The unexpectedly small 2,760K drop in the ADP measure of May private payrolls is consistent, at least, with the idea that the partial reopening of several states in the early part of the month prompted an immediate wave of rehiring.
China's services sector continues to do most of the heavy lifting for the economy's recovery this quarter, judging by the survey data.
The advance indicators of July payrolls are wildly contradictory, so you should be prepared for anything from a consensus-busting jump to a renewed outright drop, in both Friday's official numbers and today's ADP report.
China's official non-manufacturing PMI rose further in May, hitting a four-month high of 53.6.
Under normal circumstances, sustained ISM manufacturing readings around the July level, 54.2, would be consistent with GDP growth of about 2% year-over-year.
The only significant surprise in the terrible second quarter GDP numbers was the 2.7% increase in government spending, led by near-40% leap in the federal nondefense component.
Data released last week confirm that Argentina's economy remains a mess.
It's possible that first hints of better news ahead in the Covid surge in the South and West are beginning to emerge in the data.
May's money and credit data show that Covid-19 has not pushed many businesses immediately over the edge.
Yesterday's first estimate of Q2 GDP in Mexico confirmed that the economy has been under severe stress in recent months.
Brazil's external accounts remain relatively solid, making it easier for the country to withstand any potential external or domestic threat.
The closer we look at the data, the less concerned we are at the painfully slow decline in the number of new daily confirmed Covid-19 cases.
This week's data have offered further clear hard evidence of the Covid-19 shock to the Mexican economy, supporting our base case of further interest rate cuts in the coming monetary policy meetings.
The government's decision to shelve plans to reopen primary schools fully later this month will ensure that GDP remains greatly below its precoronavirus level throughout the summer months.
Yesterday's third and detailed EZ GDP data confirmed the economy hit the wall in Q1.
Yesterday's trade data in Germany added to the evidence of a relatively slow rebound as the domestic and European economies emerged from lockdown.
We expect May's GDP report, released on Tuesday, to provide an early blow to hopes that the economy will embark on a V-shaped recovery this year.
We would be surprised, but not astonished, if the Fed were to announce a shift to explicit yield curve control at today's meeting.
The data calendar is so congested next week that it makes sense to preview Tuesday's labour market report early.
Economic conditions in Brazil are deteriorating rapidly.
The People's Bank of China likely will be more than content with the latest money and credit data, to the point where it probably won't see the need to cut interest rates further anytime soon.
Yesterday's sole economic report in the Eurozone closed the book on the initial Covid-19 shock in French manufacturing.
We expect June's GDP data, released on Wednesday, to show that the economic recovery gathered momentum in June, having got off to a faltering start in May.
This week's labour market data likely will show that the Coronavirus Job Retention Scheme did not prevent a rising tide of redundancies in response to Covid-19.
Today brings a raft of data which mostly will look quite positive but will do nothing to assuage our fears over a sharp slowdown in growth in the fourth quarter.
The weekly initial jobless claims numbers have been a useful proxy for the real-time performance of the economy since Covid-19 struck.
We still expect CPI inflation to decline a little further in the second half of this year, despite its surprise increase to 0.6% in June, from 0.5% in May.
July's BoJ meeting was a quiet one, with the Board keeping the -0.10% policy balance rate and the 10- year yield target of "around zero", as widely predicted.
China's post-lockdown recovery broadly has surprised this quarter, particularly in the industrial sector.
We agree with the majority of economists that the MPC will announce on Thursday another £100B of asset purchases, primarily of gilts, once it has completed the £200B of purchases it authorised on March 19.
Japan's GDP likely dropped by 1.1% quarter- on-quarter in the first quarter, even from the favourable Q4 base, when it fell by 1.8%.
Today brings a raft of data with the potential to move markets, but we're far from convinced that the two most closely-watched reports--ADP employment and the ISM manufacturing survey--will tell us much about the future.
Data released in recent days have started to reveal a story of horror and misery in the Brazilian economy.
Today's tentative reopening of schools in England marks the biggest step forward for the economy since the lockdown was imposed on March 23.
Yesterday's national accounts showed that the downturn in the economy on the eve of the Covid-19 outbreak was sharper than first estimated.
Data released yesterday showed that the labour market in Brazil looks relatively resilient to the collapse in economic activity.
The MPC's pause for breath last week disappointed a majority of investors, who thought that it would at least tweak aspects of the support programmes put in place in March.
Last week finished as it started, with more depressing economic numbers in the Eurozone, this time from manufacturing in the core economies.
Brazil's recession carried over into the middle of Q2, but with diminishing intensity in some economic sectors.
China's trade surplus plunged to $46.4B in June, from $62.9B in May, largely in line with our below- consensus forecast.
Recent data in Colombia have confirmed that virus containment measures caused much bigger declines in activity in early Q2 than initially expected.
We're expecting to see the sixth straight drop in initial jobless claims this week, though we think the 2,500K consensus forecast is too ambitious.
We have no argument with the FOMC's view that the Covid crisis is a disinflationary event, but the run of three straight outright month-to-month declines in the core CPI likely came to an end in June.
Our current base-case forecast for the second quarter is a 30% annualized drop in GDP, based on our assessment of the hit to discretionary spending by both businesses and consumers.
Yesterday's EZ manufacturing data were slightly underwhelming, at least compared to expectations.
Mexican policymakers stuck to the script yesterday and voted unanimously to cut the main rate by 50bp to 5.50%, its lowest level in more than three years.
The economy will be a shadow of its former self over the remainder of this year, following the heavy pummelling from Covid-19.
The costs of the government's failure to lock down quickly in response to the Covid-19 pandemic, ultimately necessitating long-lasting restrictions, were visible in May's GDP figures.
We aren't much bothered by the one-tenth overshoot in the June core CPI, reported yesterday.
We're bracing for another ugly set of labour market data on Thursday, showing that both employment and earnings fell sharply in May and June.
Today's official euro area manufacturing report will be a corker.
All major EZ governments are now in the process of lifting lockdowns, but investors should expect less a grand opening, more of a careful tip-toeing.
The Q1 GDP figures, released on Wednesday, likely will show that the quarter-on-quarter decline in economic activity eclipsed the biggest decline in the 2008-to-09 recession--2.1% in Q4 2008--even though the U.K. went into lockdown towards the very end of the quarter.
The Andean countries were quick to implement significant measures in response to the initial stage of the pandemic, adopting a broad range of economic and social policies to ease the effects.
In the wake of the surprise 0.6% July surge in the core CPI, the biggest increase since January 1991--most forecasters look for mean reversion to 0.2% in today's August report.
The U.K. economy underperformed its peers to an extraordinary degree in Q2.
Friday's June inflation data in Brazil confirmed that the ripples from the worst of the Covid shock were still being felt at the end of the quarter.
More depressing economic numbers in LatAm have been released in recent days, and high frequency data continue to show a near-term bleak outlook.
Analysts have fiercely debated the consequences of the U.S. Treasury's plan to break the bank in Q2 with a whopping €3T issuance of new debt to cover the initial costs of Covid-19.
Japan's second wave of Covid-19 is in its early phase, though the virus appears to be spreading rapidly.
June's consumer price figures, released on Wednesday, probably will be overshadowed this week by data for May for GDP--see our detailed preview here--and the labour market.
Economic activity remains under severe strain in the Andes.
GDP data for July, released on Friday, showed that the economic recovery following the Covid-19 lockdown still does not look V-shaped, even though virtually all restrictions on economic activity had been lifted.
The jump in CPI inflation to 1.0% in July, from 0.6% in June, caught all analysts by surprise.
Japan in July recorded its first trade surplus in three months, as exports continued to show more signs of life.
Investors have been treated to good news in the past week, at least if they've managed to side-step the barrage of terrible economic data.
Fed Chair Powell broke no new ground in his Senate Testimony alongside--virtually--Treasury Secretary Mnuchin yesterday, maintaining the cautious tone of his recent public statements.
The annual National People's Congress meeting of China's legislature will get underway at the end of this week, after delay due to the Covid outbreak.
We think today's ADP private sector employment report for May will reflect the impact of the Verizon strike, which kept 35K people away from work last month, but we can't be sure. ADP's methodology should in theory only capture the strike if Verizon uses ADP for payroll processing--we don't know--but there's nothing to stop them from manually tweaking the numbers to account for known events. Indeed, it would be absurd to ignore the strike.
We remain convinced by other evidence that manufacturing output now is recovering, though pre-virus levels of production likely will not be realised for several years.
One of the key positive signs in the Eurozone data since the virus hit has been the evidence that households' liquid money balances have been well supported by job retention schemes, extended unemployment insurance, and aggressive monetary stimulus.
Colombian policymakers on Friday cut the reference rate by 50bp, for a third straight month, to 2.75%.
Manufacturers in China continued to trudge along in May, with their post-lockdown recovery looking increasingly fragile.
The business cycle in the Eurozone tends to follow a fairly simply script, at least in broad terms.
We hope never to see another labour market report as bad as yesterday's, though the omens aren't good.
Japan's trade balance remained in the red in June, though the deficit narrowed sharply, to -¥269B from -¥838B in May.
We're placing less weight than usual on conventional business surveys at the moment, as they are ill-suited to charting the economy's turnaround from the Covid-19 slump.
Our forecast for LatAm envisions a gradual pickup in growth, following a terrible first half.
The Covid-19 crisis has turned the tables on the Spanish economy.
We need to start today with a word of warning about today's initial jobless claims, where the risk to the consensus seems mostly to be to the upside.
It seems that yesterday's PMI data left investors and analysts more confused than enlightened.
The coronavirus pandemic is wreaking havoc in Brazil.
Retailers made hay while the sun shone in August, but clouds now are looming overhead. The 0.8% month-to-month rise in retail sales volumes took them 3.3% above last year's average.
We advise strongly against concluding from the above-consensus rebound in retail sales in May that the economy is embarking on a healthy, V-shaped recovery, from Covid-19.
The newest cluster of Covid-19 in China has reignited concerns over a second wave. On June 11, Beijing confirmed its first infection in nearly 60 days, originating reportedly from Xinfadi market, a wholesaler which supplies about 80% of the capital's produce.
Last week's enormous €1.3T take-up in the ECB's first post-virus TLTRO auction was hardly a blip for financial markets, consistent with the reactions to previous auctions.
Japan's economy contracted by 0.9% quarter-on- quarter in Q1, following a downwardly-revised 1.9% plunge in the previous quarter.
We look for a 12.5% month-to-month jump in the official measure of retail sales in June, released on Friday. This easily would top the consensus, 8.3%, for a second consecutive month.
The Bank of Japan yesterday kept its -0.10% policy balance rate and ten-year yield target of "around zero", as expected.
The EZ trade surplus in goods all but evaporated during lockdown.
July's retail sales report, released on Friday, looks set to be the third in a row to surprise the consensus to the upside.
Japan's trade deficit has bottomed out. The unadjusted shortfall narrowed to -¥833B in May,
Many indicators continue to suggest that the economic recovery has stalled.
Headline retail sales in June were just 1% below their January peak, and about 3% below the level they would have reached if the pre-Covid trend had continued.
Fed Chair Powell's comment on Sunday's "60 Minutes", that a recovery in the economy "may take a while... it could stretch through the end of next year" did not prevent a 3% jump in the S&P 500 yesterday.
We expect July's consumer prices report, released on Wednesday, to show that CPI inflation ticked up to 0.7% in July, from 0.6% in June.
May's activity data in the Andes underline the severe hit from the pandemic on economic activity.
We're braced for disappointing jobless claims numbers today.
Japan's economy shrank by an historic 7.8% quarter-on-quarter in Q2, much worse than the 0.6% slip in the first quarter.
Policymakers in Brazil and Chile took another big step this week in assuring markets that they won't hesitate to act in the fight against the virus.
In recent client "meetings" we have been emphasizing the idea that a sustained recovery in the economy over the summer depends on the solidity of a three-legged stool.
The latest official data continue to understate the collapse in labour demand since Covid-19.
We keep hearing that the surge in Covid-19 infections in the South is not a big deal, because the number of cases and the subsequent hospitalizations are still very low when compared to the nightmare suffered in New York and other states, which had thousands of deaths.
China's economy got off to an uneasy start in the third quarter.
The first real glimpse of India's economic performance early this quarter is grim, adding weight to our below-consensus GDP forecast.
Friday's second Q1 GDP estimate confirmed that lockdowns to halt the spread of Covid-19 hurt the EZ economy in Q1. Real GDP plunged by 3.8% quarter-on- quarter, following a 0.1% rise in Q4, in line with the first estimate.
Data released on Friday confirmed an appalling end to the first quarter for the Brazilian and Colombian economies. In Brazil, the March IBC-Br, a monthly proxy for GDP, plunged 5.9% month-to-month, close to expectations.
The Policy Board of the Bank of Japan yesterday kept its main settings unchanged, as widely expected. In another 8-to-1 vote, members maintained the policy balance rate and the ten-year yield target at -0.10% and "around zero", respectively, while the forward guidance still pledges to keep "short- and long-term policy interest rates... at their present or lower levels".
We already have a pretty good idea of what happened to consumers' spending in March, following Friday's GDP release, so the single most important number in today's monthly personal income and spending report, in our view, is the hospital services component of the deflator.
Last week's preliminary estimate of Q1 GDP has extinguished any lingering chance that the MPC might raise interest rates at its next meeting on May 10.
Friday's advance GDP data provided the first solid evidence of a Q1 slowdown in the euro area economy.
We see no reason to think that the recent volatility in payrolls--the 311K leap in January, followed by the 20K February gain--will continue.
Japan's Q1 is coming more sharply into focus.
The startling 5.5% drop in auto sales in March left sales at just 16.5M, well below the 17.4M average for the previous three months and the lowest level since February last year. A combination of the early Easter, which causes serious problems for the seasonal adjustments, and the lagged effect of the plunge in stock prices in January and February, likely explains much of the decline.
The BoJ kept policy unchanged last week, but made a significant change to its communication, dropping its previous explicit statement on the timing for hitting the inflation target.
Once again, MPs failed to coalesce around any way forward for Brexit in the indicative votes process on Monday.
The deterioration of global risk appetite and, in particular, domestic politics have put the Brazilian real under severe pressure in recent weeks.
The latest Markit/CIPS manufacturing survey has dashed hopes that sterling's depreciation and the pickup in global trade will facilitate strong growth in U.K. production this year. The PMI dropped to 54.2 in March, from 54.6 in February.
The EU's negotiations with the U.K. over Brexit are off to a bad start. The position in Brussels is that negotiations on a new relationship can't begin before the bill on the U.K.'s existing membership is settled. But this has been met with resistance by Westminster; the U.K. does not recognise the condition of an upfront payment to leave.
The Tankan survey--published on Monday--points to still buoyant sentiment, a further tightening of the labour market, and building inflation pressures.
Economic data in the Eurozone continue to come in soft. Yesterday's final manufacturing PMIs confirmed that the euro area index slipped to an eight-month low of 56.6 in March, from 58.6 in February.
We can think of at least three reasons for the apparent softness of ADP's March private sector employment reading.
It is fair to say that the economic debate on fiscal policy has shifted dramatically in the last 12-to-18 months.
LatAm, particularly Mexico, has dealt with Donald Trump's presidency better than expected thus far. Indeed, the MXN rose 10.7% against the USD in Q1, the stock market has recovered after its initial post-Trump plunge, and risk metrics have eased significantly.
Argentina's financial markets and embattled currency have been under severe pressure in recent weeks, with the ARS hitting a new record low against the USD and government bonds sinking to distress levels.
News that the U.K.'s departure from the E.U. has been delayed by six months, unless MPs ratify the existing deal sooner, appears to have done little to revive confidence among businesses.
It's pretty easy to spin a story that the recent core PCE numbers represent a sharp and alarming turn south.
The biggest surprise in the revisions to first quarter GDP growth, released yesterday, was in the core PCE deflator.
Yesterday's economic numbers in the Eurozone were mixed, but we are inclined to see them through rose-tinted glasses.
Inflation in Mexico remains relatively sticky, limiting Banxico's capacity to adopt a more dovish approach, despite the subpar economic recovery.
Brazil's recovery has been steady in recent months, and Q1 likely will mark the end of the recession. The gradual recovery of the industrial and agricultural sectors has been the highlight, thanks to improving external demand, the lagged effect of the more competitive BRL, and the more stable political situation, which has boosted sentiment.
The preliminary estimate of Q1 GDP looks set to show that the economy started 2017 on a weak footing. We share the consensus view that quarter-on-quarter GDP growth slowed to 0.4%, from 0.7% in Q4.
Yesterday's ECB meeting painted a picture of a central bank in wait-and-see mode. The main refinancing and deposit rates were kept at 0.00% and -0.4% respectively, and the marginal lending facility rate also was unchanged at 0.25%.
Chief U.S. Economist Ian Shepherdson on U.S. housing starts
This week's Mexican retail sales report for February offered more support to our view that domestic conditions improved at the end of Q1.
Yesterday's ECB meeting was comfortably uneventful for markets.
It's always dangerous when risk assets rally strongly into an ECB meeting, but we doubt that investors have much to fear from today's session in Frankfurt. We think the central bank will leave its main refinancing and deposit rates at 0.00% and -0.4% respectively.
The squeeze on real wages has just ended and GfK's consumer confidence index hit a 11-month high in March.
Korean real GDP growth rebounded to 1.1% quarter-on-quarter in Q1, after GDP fell 0.2% in Q4. Growth in Q4 was hit by distortions, thanks to a long holiday in October, which normally falls in September.
The first point to make about today's Q1 GDP growth number is that whatever the BEA publishes, you probably should add 0.9 percentage points.
Whatever number the BEA publishes this morning for first quarter GDP growth -- we expect zero -- you probably should add about one percentage point to correct for the persistent seasonal adjustment problem which has plagued the data for many years. Reported first quarter growth has been weaker than the average for the preceding three quarters in 21 of the 31 years since 1985 -- and in eight of the past 10 years.
The BoJ until last week had been in wait-and-see mode over China's slowdown, but they finally folded with Thursday's decision.
We fear that private spending in the EZ slowed in Q1, despite rocketing survey data. This fits our view that household consumption will slow in 2017 after sustained above-trend growth in the beginning of this business cycle.
The national accounts for the fourth quarter showed that the economy relied on households slashing their saving rate to a record low in order to spend more. Now, growth in consumer spending will have to fall back in line with real incomes, which will increasingly be impaired by rising inflation.
The economic data in the Eurozone were mixed while we were away.
Japan's unemployment rate edged back up to 2.5% in February after the drop in January to 2.4%.
We'd be very surprised to see a material weakening in today's March ISM manufacturing survey. The regional reports released in recent weeks point to another reading in the high 50s, with a further advance from February's 57.7 a real possibility.
Economic data released on Friday underscored our view that bolder rate cuts in Brazil are looming. The BCB's latest BCB's inflation report, released on Thursday, showed that policymakers now see conditions in place to increase the pace of easing "moderately" .
The definition of "yesbutism": Noun, meaning the practice of dismissing or seeking to diminish the importance of data on the grounds that the next iteration will tell the opposite story.
Japan's services PMI edged down to 52.0 in March, from 52.3 in February, taking the Q1 average to 52.0, minimally up from Q4's 51.9.
The MPC likely will vote unanimously to keep Bank Rate at 0.75% on Thursday.
Data yesterday revealed that headline inflation in Germany was unchanged in March at 1.5%, thanks mainly to higher energy inflation, which offset a dip in food inflation.
Brazil's February industrial production numbers, labour market data, and sentiment indicators are gradually providing clarity on the underlying pace of activity growth, pointing to some red flags.
We set out in detail yesterday, here, why we think the official payroll number today will be better than the 129K ADP reading; we look for 160K.
March payrolls were constrained by both the impact of colder and snowier weather than usual in the survey week, and a correction in the construction and retail components, which were unsustainably strong in February.
China has a nuclear option in the face of pressure from U.S. tariffs, namely, to devalue the currency.
Most investors remain convinced that the MPC will raise Bank Rate when it meets next, on May 10.
German net exports probably remained under pressure at the start of the year.
Friday's industrial production report in Germany capped a miserable week for economic data in the Eurozone's largest economy.
Brazil's recent data show that inflation is still falling, allowing the central bank to ease further next month, while economic activity is improving, though the rate of growth has slowed.
The point when businesses and households can breathe a sigh of relief about Brexit looks set to be delayed again this week.
The return to normal in the March payroll numbers, with a 196K headline increase, is another nail in the coffin of the "imminent recession" theory.
Officially, Japanese wages have been falling year- over-year since January, marking a break from the gradual acceleration over the past 18 or so months.
Last week's manufacturing data in Germany left investors with more questions than answers.
Economic data have yielded the limelight in recent months to Brexit news and, alas, we doubt that February's GDP data, released on Wednesday, will reclaim investors' attention.
Colombia and Chile faced similar broad trends through most of 2018.
In one line: Terrible, but this is possibly the bottom.
In one line: Flat in Q1, but scope for modest gains ahead.
In one line: Stabilisation in the m/m data, but trend still points to slower output growth.
In one line: Still too early to take the core CPI at face value; construction collapsed during lockdown.
The tax plan released by the administration yesterday was so thoroughly leaked that it contained no real surprises. The border adjustment tax is dead -- not that we thought it would have passed the Senate in any event -- and the centerpiece is a proposed cut in the corporate income tax rate to 15% from 35%.
In one line: Hideous. Expect a clear drop next week.
We aren't convinced that China's recovery is in train just yet.
The recovery in small business sentiment since the fourth quarter rollover has been extremely modest, so far.
Colombia's disinflation since mid-2016 has been driven by easing pressures on food prices, weak demand, and the better performance of the COP. But higher regulated prices at the start of the second quarter have triggered a pause in the downward trend.
Fears of a Chinese hard landing have roiled financial and commodity markets this past year and have constrained the economic recovery of major raw material exporters in LatAm.
Markets were jolted yesterday by news that the U.S. Fed is mulling ending, or at least slowing, the reinvestment of Treasuries and mortgage-backed securities later this year. Such a move would reduce liquidity in global markets that has underpinned soaring equity prices in recent years.
Inflation pressures in the Eurozone edged higher last month, reversing weakness at the start of the year.
We have been telling an upbeat story about the EZ economy in recent Monitors, emphasizing solid services and consumers' spending data.
The relative strength of the investor and consumer confidence reports for March, released this week, signal a better outlook for the Mexican economy.
The Monetary Policy Committee of the Reserve Bank of India lowered the benchmark repurchase rate by another 25 basis points yesterday, to 6.00%, as widely expected.
China hit back against the Trump-administration tariffs yesterday, targeting Mr. Trump's electorate.
Evidence that the U.K. economy has slowed significantly this year is starting to come in thick and fast. Following the Markit/CIPS manufacturing PMI on Monday --which signalled that growth in production declined in March to its lowest rate since July--the construction PMI dropped to 52.2 in March, from 52.5 in February.
All the main surveys of business activity in Q1 now have been released and they present a uniformly downbeat picture.
The official payroll numbers seem not to be consistently affected by seasonal adjustment problems when Easter falls in March, probably because the earliest possible date for the holiday, the 23rd, comes long after the payroll data are captured. The BLS data cover the week of the 12th.
Data yesterday showed that consumers in the euro area increased their spending in February, following recent weakness. Retail sales rose 0.7% month-to-month in February, reversing the cumulative 0.4% decline since November. The year-over-year rate was pushed higher to 1.8% from an upwardly revised 1.5% in January.
Brazilian February industrial production data, released yesterday, were relatively positive. Output rose 0.1% month-to-month, pushing the yearover- year rate down to -0.8% from 1.4% in January. Statistical quirks were behind February's year-over-year fall, though.
We remain optimistic on the scope for sterling to appreciate this year, reflecting our views that a deal for a soft Brexit will be reached soon and that the MPC will resume its tightening cycle later this year.
We don't directly plug the ADP employment data into our model for the official payroll number. ADP's estimate is derived itself from a model which incorporates lagged official payroll data, because payrolls tend to mean-revert, as well as macroeconomic variables including oil prices, industrial production and jobless claims -- and actual employment data from firms which use ADP's payroll processing services.
A trio of data releases yesterday provided no relief from the run of abysmal economic news.
Manufacturing orders in Germany recovered some ground in the middle of Q1, following the plunge at the beginning of the year. Factory orders rose 3.4% in February, pushing the year-over-year rate up to +4.6% from a revised 0.0% in January.
Sentiment has been improving gradually in Mexico in recent weeks, reversing some of the severe deterioration immediately after the U.S. presidential election. Year-to-date, the MXN has risen 10.3% against the USD and the stock market is up by almost 8%. We think that less protectionist U.S. trade policy rhetoric than expected immediately after the election explains the turnaround.
Everything but the weather points to a strong headline payroll number for March. Our composite leading payroll indicator has signalled robust job growth since last fall, and the message for March is very clear.
The meta game between China and Mr. Trump started as soon as he had any possibility of winning the election in 2016.
Your correspondent is on the slopes this week, but the employment report deserves a preview nonetheless.
Readers have asked us about the availability of flow-of-funds data in the Eurozone similar to the detailed U.S. reports. The ECB's sector accounts come close and cover a lot of ground, but are also released with a lag. We can't cover all sectors in one Monitor, but the investment data for non-financial firms, excluding construction, suggest that investment growth slowed last year.
The rise in Markit/CIPS services PMI to 55.0 in March, from 53.3 in February, brings some relief that GDP growth has not stalled in Q1, following manufacturing and construction surveys that signalled near-stagnation.
Consumers' spending in the Eurozone slowed in the second half of 2017, providing a favourable base for growth in H1 2018.
Yesterday's economic reports added to the evidence the euro area economy as a whole is showing signs of resilience in the face of still-terrible conditions in manufacturing.
The Governor's comments late last week successfully recalibrated markets, which had concluded that a May rate hike was virtually certain, despite the MPC's deliberately vague guidance.
Today's industrial production data in the Eurozone will extend the run of soft headlines at the start of the year.
Yesterday's industrial production report in Mexico added weight to the idea that the sector improved marginally in the first quarter, despite many external threats. Industrial output rose 0.1% month-to-month in February, following a similar gain in January. The calendar-adjusted year-over-year rate rose to -0.1%, after a modest 0.3% contraction in January.
CPI inflation held steady at 2.3% in March, as we and the consensus had expected. Nonetheless, the consumer price figures boosted sterling and bond yields, as the details of the report made it clear that inflation is on a very steep upward path.
The month-to-month core CPI numbers in March were consistent, in aggregate, with the underlying trend.
Chinese PPI inflation dropped again in March to 3.1%, from February's 3.7%. Commodities were the driver, but base effects should mean the headline rate won't fall further in coming months; it is more likely to rise in Q2.
Inflation in Brazil surprised to the upside this week, with a sharp rebound that looks alarming at face value.
The sluggishness of consumers' spending and business investment in the first quarter means that hopes of a headline GDP print close to 2% rely in part on the noisier components of the economy, namely, inventories and foreign trade.
February's industrial production and construction output data leave us little choice but to revise down our forecast for quarter-on-quarter GDP growth in Q1 to 0.2%, from 0.3% previously.
Friday's weekly report on the assets and liabilities of U.S. commercial banks will complete the picture or March and, hence, the first quarter. It won't be pretty. With most of the March data already released, a month-to-month decline in lending to commercial and industrial companies of about 0.7% is a done deal. That would be the biggest drop since May 2010, and it would complete a 1% annualized fall for the first quarter, the worst performance since Q3 2010. The year-over-year rate of growth slowed to just 5.0% in Q1, from 8.0% in the fourth quarter and 10.3% in the first quarter of last year.
The ECB made no changes to its policy stance yesterday.
Industrial production hit its stride last year, notching up eight consecutive month-to-month gains--the longest run of unbroken growth since May 1994--before a setback in December, which was triggered by the temporary closure of the Forties oil pipeline.
Today's March CPI ought to provide further support for the idea that the trend rate of increase in the core index is running at about 0.2% per month, an annualized rate, if sustained, of about 2.5%.
Data released yesterday reinforced our forecast of a further rate cut in Brazil next month.
President Xi Jinping yesterday reiterated China's commitment to reform and the opening of its economy at a highly-anticipated speech at the Boao forum.
The plunge in Russia's financial markets, in response to targeted U.S. sanctions--see here--against Russian oligarchs and government officials, was the main EU news story yesterday.
Korea's labour market took an overdue breather in March after an extremely volatile start to the year.
A plunge in apparel prices attracted most of the attention after the release of the March CPI report, but it was not, in our view, the most important number.
The economy has remained remarkably resilient in the face of intense political uncertainty.
CPI inflation in China surged to a five-month high of 2.3% in March, from 1.5% in February.
The E.U.'s decision to grant the U.K. a Brexit extension until October 31 does not extinguish the possibility that the MPC will raise Bank Rate before the end of the year.
The EU's decision to grant the U.K. an extension under Article 50, until October 31, reveals two key aspects of continental Europe's position on Brexit.
In the last two months, we have suggested that monetary conditions have turned the corner, but have cautioned that Lunar New Year distortions make the March data critically important.
The effects of Covid-19--both negative and positive--on Korea's labour market certainly were felt in February.
The story of U.S. retail sales since last summer is mostly a story about the impact of the hurricanes, Harvey in particular.
Yesterday's inflation data in Germany were old news to markets, but the details were spectacular all the same.
We are not concerned by the slowdown in retail sales over the past few months.
The holiday effects are at it again. C hina's trade balance dropped to a deficit of $5.0B in March, from a surplus of $33.5B in February, confounding expectations for a surplus of $27.5B.
Last week, the Bank of Mexico unanimously voted to leave the main rate on hold, at 7.50%, its highest level since early 2009.
Mexico's industrial recovery, which began in late Q4, lost momentum at the start of the second quarter.
Inflation pressures in France increased significantly at the start of the year.
Today's producer price report for March likely will show a further increase in core goods inflation, which already has risen to 2.0% in February, from 0.2% in the same month last year. The acceleration in the U.S. PPI follows the even more dramatic surge in China's PPI for manufactured goods, which jumped to 6.6% year-over-year in February, from minus 4.9% a year ago. China's PPI is much more sensitive to commodity prices than the U.S. series, so there's very little chance that core U.S. PPI goods inflation will rise to anything like this rate.
Treasury yields closed Friday a few basis points higher across the curve than the day before the surprisingly soft March payroll report. A combination of slightly less dovish-than-expected FOMC minutes, a hawkish speech from Richmond president Jeff Lacker, rising oil prices, and robust--albeit second-tier--data last week seem to have done the work.
Yesterday's detailed CPI data in Germany and France broadly confirmed the message from the advance data in the Eurozone as a whole.
Yesterday's labour market data showed that growth in households' income has slowed significantly in recent months. Firms are both hiring cautiously and restraining wage increases, due to heightened uncertainty about the economic outlook and rising raw material and non-wage labour costs. Consumers' spending, therefore, will support GDP growth to a far smaller extent this year than last.
Mexico's February industrial production report was weaker than markets expected. Output expanded by 0.7% year-over-year, below the consensus, 1.2%, and slowing from 0.9% in January.
Many analysts argue that the MPC inevitably will raise interest rates at its May 10 meeting because markets have fully priced-in a 25bp uplift.
The Bank kept interest rates unchanged at 1.50% yesterday, but downgraded its inflation forecast for 2018 to 1.6% from 1.7%
Whatever happened to consumers' sentiment in March, the level of University of Michigan's index will be very high, relative to its long-term average.
Nowhere is the gap between sentiment and activity wider than in the NFIB survey of small businesses. The economic expectations component leaped by an astonishing 57 points between October and December, but the capex intentions index rose by only two points over the same period, and it has since slipped back. In February, the capex intentions index stood at 26, compared to an average of 27.3 in the three months to October.
Investors have been caught out by the speed of the recent rise in RPI inflation and have revised up their expectations. Even so, inflation swaps imply that markets expect RPI inflation to be 3.6% in one year's time, not much above the latest print, 3.2% in February. We still think RPI inflation will exceed markets' expectations.
The Covid-19 Tsunami Hits Then EZ Economy...When Is The Recovery?
Don't be Deceived by the Consumer Slowdown...It's a One-Time Transition to Sustainability
Brexit Risk Currently Is Only Depressing Capex...Rates Will Rise Soon To Contain Wage Cost Pressures
Covid-19: A Savage Toll On Latam's Economy...Prospects Have Turned Bleak
The Lockdown Is Working; It Will Be Eased In June...But GDP Won't Reach Pre-Virus Levels Until Late 2021
In the wake of the soft-looking ADP employment report released on Wednesday, the true consensus for today's official payroll number likely is lower than the 230K reported in the Bloomberg survey. As we argued in the Monitor yesterday, though, we view ADP as a lagging indicator and we don't use it is as a forecasting tool.
Long-time readers will be aware of our disdain fro the ADP employment report, which usually tells us nothing more than that the monthly changes in payrolls tend to mean-revert. That's because the published ADP employment number for each month is generated by regressions which incorporate lagged official payroll data, as well as information from companies which use ADP for payroll processing.
Beware Economist Bearing Forecasts....Viruses Don't Respect Our Wishes
A Dovish Fed is Helping Latam Policymakers...Rates to Remain on Hold
The Bifurcated Eurozone Economy: Manufacturing Is Terrible, But Services Look Decent
The Tightening Labor Market is all that Matters...Expect the Fed to Hike at Each Quarter-End
Rising Inflation is Causing a Sharp Slowdown...Sterling's Depreciation has been Harmful so Far
Growth in households' disposable incomes has been supported in recent years by falling debt servicing costs. The proportion of households' incomes absorbed by interest payments fell to a record low of 4.5% in Q4 last year, down from 4.7% a year ago and a peak of 10% in 2008.
China's 2018 growth forecast revised up...but activity in Japan took a breather in Q1
Latam started the year in low gear...but expect a gradual acceleration in Q2 and Q3
Is This Really The Recovery For China?...Japan Catches A Cold;...Q1 Will Be Poor, But The BOK Is Set For A Long Pause
Trade talk and falling stocks are hurting...but the fed is still on course for four hikes this year
MPC to delay in May due to Q1 GDP and Inflation...Political risks will resurface later this year
Japan's unemployment rate returned unexpectedly to its 26-year low of 2.3% in February, falling from 2.5% in January.
Friday's economic data added to the evidence of a Q1 rebound in EZ consumption growth.
Brazil's economic activity data have disappointed in recent months, firming expectations that the Q1 GDP report will show another relatively meagre expansion.
Yesterday's trade data added to the evidence that momentum in the German economy slowed sharply at the start of the year.
It's probably too soon to expect to see a meaningful reaction in the NFIB small business survey to the drop in stock prices, but it likely is coming, and a hit in today's March report can't be ruled out entirely.
Core CPI inflation has been 2.1-to-2.2% year-over- year for the past seven months, a remarkably stable run which likely will persist for a few more months.
Official Chinese real GDP growth likely slipped to 6.3% year-over-year in Q1, the lowest on record, from 6.4% in Q4, which matched the trough in the Great Financial Crisis.
Inflation is falling quickly in Colombia, despite the VAT increase in Q1, so we expect more BanRep rate cuts over the next few months. Consumer prices rose 0.5% month-to-month unadjusted in March, pushing the inflation rate down to 4.7% year-over-year, from 5.2% in February. This is the lowest rate in almost two years, thanks to a favourable base effect and fading pressures from food prices.
The ECB will rest on its laurels today.
Our view that households will continue to spend more in the first half of this year, preventing the economy from slipping into a capex-led recession, was not seriously challenged yesterday by the BRC's Retail Sales Monitor.
Halifax's house price index rose by an eye catching 1.5% month-to-month in March, superficially suggesting that the housing market is reviving.
China's FX reserves were relatively stable in March, with the minimal increase driven by currency valuation effects.
The Prime Minister is in a position on Brexit all chess players dread: zugzwang.
Chile's central bank left its policy rate on hold last Friday at 3.0%, in line with market expectations, amid easing inflationary pressures and a struggling economy.
The underlying U.S. consumer story, hidden behind a good deal of recent noise, is that the rate of growth of spending is reverting to the trend in place before last year's tax cuts temporarily boosted people's cashflow.
The BLS offered no estimate of the impact on payrolls of the snowstorm which hit the Northeast during the March survey week, but it appears to have been substantial. All the leading indicators pointed to a solid 200K-plus reading, more than double the official initial estimate, 98K.
March's consumer price figures, released tomorrow, look set to show that inflation's ascent was kept in check by the later Easter this year compared to last. Nonetheless, CPI inflation will take big upward strides over the coming months, and it likely will exceed 3% by the summer.
We expect Banxico to keep interest rates on hold at 7.50% at Thursday's meeting. But policymakers likely will adopt a slightly dovish tone, as inflation has fallen faster than they were expecting in their recent forecast.
Brazilian inflation hit its lowest rate in almost seven years in March, while Mexico's rate is the highest since July 2009. Yet we expect Mexico to tighten policy only modestly in the near term, while Brazil will ease rapidly.
March's consumer prices figures, released on Wednesday, are even more important than usual, as they are the last to be published before the MPC's next meeting on May 10.
China's Growing Demand-Supply Mismatch...Three Straight Quarters Of Contraction In Japan...Covid Defeated, But Korea's Economic Hit Isn't Over...An H1 Recession In India Is All But Guarenteed
CPI inflation was steadfast at 1.9% in March, undershooting the consensus and our forecast for it to rise to 2.0%.
Growth appears to have accelerated in the first quarter in Mexico, as NAFTA-related uncertainty abated, inflation started to fall, and the MXN rebounded.
The levelling-off in the industrial surveys in recent months is reflected in the consumer sentiment numbers. Anything can happen in any given month, but we'd now be surprised to see sustained further gains in any of the regular monthly surveys.
Colombia's recently-released data signal that the economy started the year quite strongly, following a relatively poor end to Q4.
Yesterday's data were mixed, though disappointment over the weakening in the Richmond Fed survey should be tempered by a quick look at the history, shown in our first chart.
Economic activity in Mexico during the past few months has been stronger than most observers expected. Growth has certainly moderated from the relatively strong pace recorded during the second half of last year, but data for January and February show that it is still quite strong.
The Prime Minister's refusal last week to reaffirm her party's 2015 election pledge not to raise income tax, National Insurance or VAT has fuelled speculation that taxes will rise if the Conservatives are re-elected on June 8. Admittedly, Mrs. May asserted that her party "believes in lower taxes", and the tax pledge s till might appear in the Conservatives' manifesto, which won't be published for a few weeks.
The recovery in existing home sales appears to have stalled, at best.
One way or another, the preliminary estimate of Q1 GDP--due Friday--will have a big market impact, following Mark Carney's warning last week that a May rate hike is not a done deal.
The initial "official estimate" of the French presidential election--released 20.00 CET--suggest that the runoff will be between the centre-right Emmanuel Macron and Front National's Marine Le Pen. This is consistent with opinion polls. The average of five early estimates also suggests that Mr. Macron won the vote with 23.1% of the vote against Mrs. Le Pen's 22.5%.
The economic data in Brazil were poor while we were away.
Inflation in Brazil remained subdued at the start of the second quarter, strengthening the odds for an additional interest rate cut next month, and opening the door for further stimulus in June.
Japan's headline CPI inflation is set to edge down in coming months, thanks to non-core prices.
Our bullish view of the housing market is undimmed by yesterday's news that March existing home sales dropped to 5.21M, from 5.48M in February.
On balance, our conviction that the MPC will surprise markets on May 2 by retreating from its dovish stance has risen, following last week's labour and retail sales data.
Sterling jumped last week to its highest level against the dollar since last October in response to news that a general election will be held on June 8. Markets are betting that the Conservative Government will sharply increase its majority, enabling Theresa May to ignore Eurosceptic backbenchers when she strikes a deal with the EU.
While we were out, Brazil's data were relatively positive, showing that inflation is still falling quickly and economic activity is stabilizing. The country has made a rapid and convincing escape from high inflation over the past year.
The monthly new home sales numbers are so volatile that just about anything can happen in any given month.
Markets are trading like Emmanuel Macron has already moved into the Élysée Palace. Eurozone equities soared at the open yesterday, lead by the French banks, 10-year yields in France plunged, and the euro jumped. This makes sense given the signal from the polls. They were correct in their prediction of Mr. Macron's victory on Sunday, and they have been consistently forecasting that he will comfortably beat Mrs. Le Pen in the runoff.
A shutdown of the federal government, which could happen as early as this weekend, is a political event rather than a macroeconomic shock. But if it happens--if Congress cannot agree on even a shortterm stop-gap spending measure in order to keep the lights on after the 28th--it would demonstrate yet again that the splits in the House mean that the prospects of a substantial near-term loosening of fiscal policy are now very slim.
In yesterday's Monitor, we suggested that China's monetary policy stance is now easing.
The key data today, covering March durable goods orders and international trade in goods, should both beat consensus forecasts.
The ECB will leave its main refinancing and deposit rates at 0.00% and -0.4% unchanged today, and it will also maintain the pace of QE at €30B per month.
Rising inflation is pressuring some LatAm central banks to take a cautious stance at a time when growth is subpar, particularly in the two biggest economies of the region.
We're expecting to learn today that the economy expanded at a 2.6% annualized rate in the first quarter, rather better than we expected at the turn of the year--our initial assumption was 1-to-2%--and above the consensus, 2.3%.
Mexico's inflation is finally falling, giving policymakers room for manoeuvre.
Friday's economic data confirmed that inflation in Germany rebounded last month, and leading indicators suggest that it is headed higher in coming months.
The economy's resilience in the first quarter of this year, in the midst of heightened Brexit uncertainty, can be attributed partly to a boost from no-deal Brexit precautionary stockpiling.
March's public sector borrowing figures brought more signs that the economy has lost considerable momentum this year. Borrowing, on the PSNB excluding public sector banks measure, came in at £5.1B in March, up slightly from £4.3B in March 2016.
Colombia's economy activity is deteriorating rapidly, suggesting that BanRep will have to cut interest rates on Friday. Incoming data make it clear that the economy has moved into a period of deceleration, painting a starkly different picture than a year ago.
Korean real GDP growth--to be published on Thursday--should bounce back in Q1 to 1.0% quarter-on-quarter, after the 0.2% drop in Q4.
Today brings new housing market data, in the form of the weekly applications numbers from the MBA. The weekly data are seasonally adjusted but are still very volatile, especially in the spring.
In Brazil, last week's formal payroll employment report for March was decent, with employment increasing by 56K, well above the consensus expectation for a 48K gain.
Public borrowing has continued to fall more rapidly than anticipated in the latest official plans.
If you wanted to be charitable, you could argue that the downturn in the rate of growth of core durable goods orders in recent months has not been as bad as implied by the ISM manufacturing survey.
A widening core trade deficit is the inevitable consequence of a strengthening currency and faster growth than most of your trading partners. Falling oil prices have limited the headline damage by driving down net oil imports, but the downward trend in core exports since late 2014 has been steep and sustained, as our first chart shows. The deterioration meant that trade subtracted an average of 0.3 percentage points from GDP growth in the past three quarters.
The run of better-than-expected public borrowing figures ended abruptly with the publication of March data yesterday.
Friday's economic data suggest that the downtrend in German PPI inflation is reversing.
The contribution of energy prices to CPI inflation is set to increase over the coming months, following the pick-up in Brent oil prices to $74 per barrel, from $65 at the beginning of March.
Today's economic data will add to the evidence that construction in the Eurozone slowed in the first quarter.
Mortgage applications appear to have recovered from their reported February drop, which was due mostly to a very long-standing seasonal adjustment problem
We can't afford the luxury of believing China's year-over-year growth rates. Real GDP growth was 6.8% year-over-year in Q1, matching the rate in Q4 and Q3, and hitting consensus.
ebruary's labour market data failed to make a resounding case for the MPC to raise interest rates in May, prompting markets to reduce the probability attached to a hike next month to 85%, from nearly 90% before the data were released.
China's real GDP growth was unchanged at 6.4% year-over-year in Q1, above the consensus for a slowdown to 6.3%.
Economic news in Europe continues to take a back-seat to volatility in politics. Yesterday's announcement by U.K. Prime Minister Theresa May that she is seeking a snap general election on June 8th cast further doubt over what exactly Brexit will look like.
Data on Friday confirmed that headline inflation in the Eurozone rose a bit last month, to 1.5% from 1.4% in January, but also that the core rate dipped by 0.1 percentage points, to 1.0%.
Yesterday's final EZ CPI data for March confirmed the message from the advance report that inflation pressures eased last month.
The February activity report in Colombia showed a modest pick-up in manufacturing activity and strength in the retail sales numbers.
Output in EZ construction rebounded sharply in February, erasing a slip at the start of the year.
Leading indicators and survey data in Brazil still suggest a rebound from the relatively soft GDP growth late last year and in Q1.
For now, we're happy with our base-case forecast that growth will be nearer 3% than 2% this year, and that most of the rise in core inflation this year will come as a result of unfavorable base effects, rather than a serious increase in the month-to-month trend.
The big difference in this round of stimulus is in the complete lack of easing on the shadow banking side.
We are fairly sanguine that government bond markets in the Eurozone will take the end of QE in their stride.
China's March money and credit data, published last Friday, showed that conditions continue to tighten, posing a threat to GDP growth this year.
China's property market looks to be turning the corner, going by the stronger-than-expected March report.
This week's labour market, inflation and retail sales data--the last before the MPC meets on May 10--will have a major bearing on the Committee's decision.
Prime Minister Theresa May's announcement that Parliament will vote today on holding a general election on June 8 shocked markets and even her own party's MPs. Betting markets were pricing in only a 20% chance of a 2017 election before yesterday's news.
Over the past 18 months, the year-over-year rate of growth of manufacturing output has swung from minus 2.1% to plus 2.5%.
The EZ's current account surplus is solid as ever, despite falling slightly in February to €35.1B, from an upwardly-revised €39.0B in January.
The biggest surprise in the recent inflation numbers has been the surge in the PCE measure of hospital services costs, where the year-over-year rate has jumped to 3.8% in February, an eight-year high, from just 1.3% in September.
Argentina's government continues to show signs of reining in fiscal policy, with the primary budget balance improving steadily over the last year.
The BoJ yesterday published its semi-annual Financial System Report, which often gives insights into the longer-term thinking driving BoJ policy.
This weekend's first round of the French presidential election is too close to call. Our first chart indicates that a runoff between Marine Le Pen and Emmanuel Macron remains the best bet. But the statistical uncertainty inherent in the predictions, and the proximity of the two remaining candidates--the centre-right Mr. Fillon and far-left Mr. Melenchon-- mean that this is now effectively a four-horse race.
The U.S. consumer is back on track, almost. We have argued in recent months that the sharp slowdown in the rate of growth of consumption is mostly a story about a transition from last year's surge, when spending was boosted by the tax cuts and, later, by falling gas prices, to a sustainable pace roughly in line with real after-tax income growth.
Japan's trade activity slowed sharply in Q1. The yen value of exports fell 0.8% quarter-on-quarter in Q1, after a 5.5% jump in Q4.
Equities in the Eurozone are off to a strong start in Q2, building on their punchy 12% gain in the first quarter.
Markets tend to ignore Eurozone construction data, but we suspect today's report will be an exception to that rule. Our first chart shows that we're forecasting a 8.5% month-to-month leap in February EZ construction output, and we also expect an upward revision to January's numbers.
The 1.2% month-to-month fall in retail sales volumes in March undoubtedly was due mostly to the bad weather.
The bulk of China's PMIs were published over the weekend and yesterday, leaving only the Caixin services PMI on Wednesday.
The unemployment rate has now been at 4.1% for six straight months. This does not mean, though, that it's safe to assume it will remain there, or indeed that this level of unemployment can be sustained without eventually triggering a meaningful increase in inflation.
Inflation in the Eurozone stumbled at the end of Q3.
The rapid fall in CPI inflation over the last two months challenges the MPC's view that sterling's 2016 depreciation will keep inflation above the 2% target for the next three years, and greatly undermines the case for another interest rate increase in May.
On the face of it, British manufacturers are weathering the global slowdown well. The Markit/CIPS PMI jumped to 55.1 in March, from 52.1 in February, and now comfortably exceeds those for the Eurozone, U.S. and Japan.
Today's Monitor is a good opportunity to remind readers about one of the most important rules of EZ business cycle analysis.
Data released last week confirm that the Argentinian economy finally is stabilizing.
We were happy to see the small increase in the March ISM manufacturing index yesterday, following better news from China's PMIs, but none of these reports constitute definitive evidence that the manufacturing slowdown is over.
Evidence of slowing economic activity in Colombia continues to mount. Retail sales fell 2.0% year- over-rate in April, down from a revised plus 3.0% in March; and the underlying trend is falling. This year's consumption tax increase, low confidence, tight credit conditions, and rising unemployment continue to put private consumption under pressure.
Demand for new cars in the Eurozone rebounded last month. New car registrations jumped 10.3% year-over-year in May, reversing the 5.1% decline in April. The headline was boosted by solid growth in all the major economies.
Peru's April supply-side monthly GDP data confirm that the economic rebound lost momentum at the start of the second quarter.
CPI inflation surprised to the downside in April, falling to 0.3% from 0.5% in March. Both the consensus and ourselves expected the rate to hold steady. Nearly all of the surprise, however, was in airfares and clothing inflation, which were depressed, to a greater extent than we anticipated, by the shift in the timing of Easter and bad weather, respectively.
Eurozone inflation pressures remained subdued in April. Today's final data likely will show that inflation fell to -0.2% year-over-year in April, from 0.0% in March. The main story in this report will be the reversal in services inflation from the March surge, which was due to the early Easter.
The gloom which descended on the FOMC in April has lifted, mostly, and policymakers remain on track for two rate hikes this year, likely starting in September. The median fed funds forecast for the end of this year remains at 0.625%, implying a target range of 0.5-to-0.75%.
We expect May's consumer prices report, released on Wednesday, to show that CPI inflation fell to 2.0% in May, from 2.1% in April.
Inflation pressures are slowly, but surely, rising in the Eurozone. Advance data indicate that inflation in Germany rose to 0.7% year-over-year in May, up from 0.5% in April. Reduced drag from the non-core components is the main driver, with energy prices rebounding, and food prices now rising steadily at 1.4% year-over-year.
Even an ardent Brexiteer could not deny that uncertainty about the outcome of the E.U. referendum is subduing bank lending. The Bank of England's preferred measure of bank lending--M4 lending excluding intermediate other financial corporations, or OFCs--fell by 0.1% month-to-month in April.
March auto sales were much weaker than expected, falling by 5.5% month-to-month to a 25-month low, 16.5M. The average for the previous six months was 17.8M. The sudden drop in March likely was driven in large part by the huge snowstorm which tracked across the Northeast in the middle week of the month, so we think a decent rebound in April is a good bet.
We previewed today's advance EZ Q1 GDP number in our Monitor on April 30--see here--and the data since have not changed our outlook.
Friday's data in the Eurozone confirmed that inflation rose sharply last month. Headline inflation increased to 1.9%, from 1.2% in April, and core inflation also rose, by 0.4 percentage points to 1.1%.
Markets weren't impressed by the sub-consensus consumption numbers for April, reported yesterday, but the undershoot was all in the we ather-related utility component, where spending plunged 5.1% month-to-month. The process of post-winter mean reversion is now complete.
The April FOMC minutes don't mince words: "Most participants judged that if incoming data were consistent with economic growth picking up in the second quarter, labor market conditions continuing to strengthen, and inflation making progress toward the Committee's 2 percent objective, then it likely would be appropriate for the Committee to increase the target range for the federal funds rate in June".
April's retail sales figures, released today, likely will show only a partial reversal of the sharp 1.3% month-to-month fall in sales volumes in March. This would reinforce the impression that the recovery in consumer spending has been becalmed by slower job growth, the intensification of the fiscal squeeze and heightened uncertainty about the economic and political outlook.
Solid trade data for April indicate a strong start to Q2 for the Eurozone's external balance, though a €3.2B fall in German net factor income will weigh on the primary income number.
The tone of today's FOMC statement likely will be different to the gloomy April missive, which began with a list of bad news: "...economic growth slowed during the winter months, in part reflecting transitory factors. The pace of job gains moderated... underutilization of labor resources was little changed. Growth in household spending declined... Business fixed investment softened, the recovery in the housing sector remained slow, and exports declined."
Final May CPI data in the Eurozone today likely will confirm that inflation pressures edged marginally higher last month. We think inflation increased to -0.1% year-over-year, from -0.2% in April, as a result of slightly higher services inflation, and a reduced drag from falling energy prices.
The MPC predicted in last week's Inflation Report that CPI inflation eased to 0.3% in April, thereby fully reversing its increase in March to 0.5%. We think, however, the Committee is underestimating the strength of inflation pressures across the economy.
China's money data, out last week, bode ill for real GDP growth in the second half. June M2 growth dipped to 9.4% year-over-year from 9.6% in May and 10.5% in April.
Net exports should come roaring back as a driver of Eurozone GDP growth in the second quarter. The euro area trade surplus leapt to €24.3B in April, a new all-time high, up from a revised €19.9B in March. A 1.7% month-to-month fall in imports--mean-reversion from a 3.9% increase in March--was a big contributor to the higher surplus.
EURUSD has been battered in recent months, falling just over 6% since the end of April, but almost all indicators we look at suggest that the it will weake further towards 1.10, in the second half of the year.
The failure of the core CPI to mean-revert in April, after the unexpected March drop, does not mean that the Fed can relax.
We were surprised by the weakness of the April housing starts report; we expected a robust recovery after the March numbers were depressed by the severe snowstorms across a large swathe of the country. Instead, single-family permits rose only trivially and multi-family activity--which is always volatile--fell by 9% month-to-month.
The euro area's trade surplus slipped further mid- way through the second quarter; falling to a 15-month low of €16.9B in May, from a downwardly-revised €18.0B in April, and extending its descent from last year's peak of nearly €24.0B.
Consumption remains a serious weak spot in Brazil's economic cycle. High inflation, rising interest rates, surging unemployment, plunging confidence, and the government's belt tightening, have trashed Brazilians' purchasing power. Retail sales surprised to the downside in April, falling 0.4% month-to-month, equivalent to a huge 3.5% contraction year-over-year, down from a revised 0.3% gain in March. The underlying trend is awful, as our first chart shows.
The final and detailed April CPI data confirmed that inflation pressures in the Eurozone eased last month. Headline inflation slipped to 1.2%, from 1.3% in March.
The FTSE 100 has fallen by 4% over the last two weeks, exceeding the 1-to-3% declines in the main US, European and Japanese markets. The FTSE's latest drop builds on an underperformance which began in early 2014. The index has fallen by 10% since then--compared to rises of between 10% and 20% in the main overseas benchmarks--and has dropped by nearly 15% since its April 2015 peak. We doubt, however, that the collapse in U.K. equity prices signals impending economic misery. The economy is likely to struggle next year, but this will have little to do with the stock market's travails.
The jump in CPI inflation to 2.7% in April, from 2.3% in March, was only partly to a temporary boost from the later timing of Easter this year. Indeed, inflation likely will rise further over the coming months as food, energy and core goods prices all continue to pick up in response to last year's depreciation of sterling.
Sharp increases in retail sales over the last two months suggest that consumers are not overly concerned by the risk that the U.K. could leave the E.U. next week. Sales volumes rose 0.9% month-on-month in May, and April's surge was revised larger, to 1.9% from 1.3%.
Final German inflation data for May confirm that price pressures are gradually recovering in the Eurozone. Inflation rose to 0.7% in May, up from 0.5% in April, in line with the initial estimate. Headline inflation continues to move higher, a trend which will continue in the second half of the year as base effects push up energy inflation.
The market for new cars in the Eurozone remained red-hot last month. New registrations surged 18.4% year-over-year in May, up from a 9.4% rise in April, and pushing the 12-month average level of registrations to a post-crisis high of 843K units. Accelerating growth in Italy and France was the key driver.
The spectacular 1.3% rebound in manufacturing output last month -- the biggest jump in seven years, apart from an Easter-distorted April gain -- does not change our core view that activity in the sector is no longer accelerating.
Japan's trade surplus rebounded to ¥522B in April, on our adjustment, from ¥390B in March, around the same level as the official version, though from a higher base.
The Eurozone's current account surplus extended its decline in May, falling to a nine-month low of €22.4B, from €29.6B in April.
Political turmoil in Brazil continues to undermine President Dilma Rousseff's leverage over the economy. On Friday, the Lower House of Congress voted to start impeachment proceeding against Ms. Rousseff. She has until early April to present her defense against charges that she doctored government accounts and used graft proceeds to fund the 2014 electoral campaign.
It's hard to read the minutes of the April 30/May 1 FOMC meeting as anything other than a statement of the Fed's intent to do nothing for some time yet.
In April last year, something odd happened in the FX market.
The preliminary April PMIs due today will provide the first economic sentiment data for Q2, and likely will point to a continuation of the cyclical recovery. We think the composite PMI was unchanged at 54.0 in April, driven by a small gain in manufacturing offset by a slight decline in services.
The rate of growth of chain store sales has levelled off in recent months, after slowing dramatically in the first four months of this year, almost certainly in response to falling prices for dollar-sensitive goods like household electronics. In the fourth quarter of last year, the Redbook recorded same-store sales growth averaging 4.3%, but that has slowed to a 1-to-2% range since April.
We fully expect to see the third straight decline in initial jobless claims in today's report for the week ended April 18.
Weakness across EM asset markets returned after the April FOMC minutes, released last week, suggested that a June rate hike is a real possibility. The risks posed by Brexit, however, is still a very real barrier to Fed action, with the vote coming just eight days after the FOMC meeting.
Margins for German manufacturing firms remained depressed at the start of the second quarter. The headline PPI rose 0.1% month-to-month in April, pushing the year-over-year rate down marginally to -3.1% from a revised -3.0% in March. Falling energy prices are the key driver of the overall decline in the PPI.
Japan's national CPI inflation has peaked, falling to 0.7% in May from 0.9% in April.
All the evidence indicates that growth in Eurozone consumers' spending is slowing. We think data today will show that the advance GfK consumer sentiment index in Germany was unchanged at 9.5 in April, but the headline index does not correlate well with spending. The "business expectations" index is better, and while it likely will increase slightly, our first chart shows that it continues to signal a slowdown in consumers' spending growth.
Brazil's retail sales improved at the start of the second quarter, increasing 0.5% month-to-month in April, partially reversing the 0.9% contraction in March. But the details were less upbeat than the headline.
The preliminary April PMIs point to a continuation of the cyclical bounce, despite falling slightly from last month. The composite PMI in the Eurozone fell to 53.5 in April, down from 54.0 in March.
Sterling rebounded last week and the probability of a Brexit, implied by betting markets, fell from 30% to 20%. The gap between cable and interest rate expectations, which opened up at the start of this year, appears to have closed completely, as our first chart shows. Sterling's rally in April quickly ran out of steam, but the evidence that support for "Bremain" has risen recently is persuasive.
The 810K drop in jobless claims in the week ended April 18 was a bit less than we expected, but the downward trend is clear; claims have fallen by some 2.4M from their peak, in the final week of March.
The composite PMI in the Eurozone continues to edge slightly lower, falling to 53.4 in May from 53.9 in April. A fall in the services index to 53.3, from 54.1 last month offset a modest increase in manufacturing to 52.3 from 52.0 in April.
Long term benchmark yields in the Eurozone almost fell to zero towards the end of the first quarter as investors were carried away in their celebration of QE. The counter-reaction to this move, though, was violent with 10-year yields surging from 0.2% to 0.9% in the space of two months from April to June, and we think a similar tantrum could be waiting in the wings for investors. We are particularly wary that upside surprises in inflation data--mainly in Germany--could push yields up sharply in the next few months.
Japan's trade balance deteriorated sharply in May, flipping to a ¥967B deficit from the modest ¥57B surplus in April.
May's consumer prices report contained few surprises. The fall in the headline rate of CPI inflation to 2.0%, from April's Easter-boosted 2.1%, matched the consensus, our forecast and the MPC's.
Brazil's recession carried over into the beginning of Q2, but with diminishing intensity. The IBC-BR economic activity index, a monthly proxy for GDP, fell 5.0% year-over-year in April, up from a revised 6.4% contraction in March. The index's underlying trend has improved in recent months, suggesting that the economy is turning around, slowly.
The Eurozone's current account surplus slipped at the start of Q2, falling to €28.4B in April from an upwardly-revised €32.8B in March.
We continue to see signs of a strengthening upturn in Eurozone construction. Output in construction rose 0.3% month-to-month in April, pushing the year-over-year rate down to 3.2%, from an upwardly revised 3.8% in March.
Yesterday's EZ construction data confirmed that capex in the building sector plunged in the second quarter. Construction output fell 0.5% month-to-month in May, pushing the year-over-year rate up trivially to -0.8%, from a revised -1.0% in April. Our forecast for construction investment in Q2 is not pretty, even after including our assumption that production rebounded by 0.5% month-to-month in June.
Today's labour market data look set to show that the headline, three-month average, unemployment rate held steady at just 5% in May, unchanged from April's reading.
Friday's CPI data for April provided the final piece of evidence for the significant Easter distortions in this year's data.
Final inflation in the Eurozone was confirmed at 0.0% year-over-year in April, up slightly from -0.1% in March. The recovery since the trough in January has been driven mostly by a reduced drag from lower energy prices, a trend which should continue in the second quarter.
Advance April consumer survey data will likely confirm that households remain the standout driver of the cyclical recovery in the euro area. We think the headline EC consumer sentiment index rose to -1.0 in April from -3.7 in March.
Brazil's mid-April inflation report delivered more evidence that inflation is decelerating; it fell to 9.3% from 10.0% in March, reaching the slowest pace since July 2015. The unadjusted month-to-month increase surprised marginally to the upside, but the key story is of a declining year-over-year trend. Core inflation, which is a lagging indicator of the business cycle, slowed again, in line with the decline in services and market prices inflation.
German producer price inflation fell last month, following uninterrupted gains since the beginning of this year. Headline PPI inflation fell to 2.8% year-over- year in May, from 3.4% in April, constrained by lower energy inflation, which slipped to 3.0%, from 4.6% in April. Meanwhile, non-energy inflation declined marginally to 2.7%, from 2.8%.
The Eurozone's current account surplus plunged to €18.0B in May from €24.0B, the biggest monthly fall since July 2013, but an upward revision to the April data makes the headline look worse than it is. These numbers are volatile, even after seasonal adjustments, and revisions have been larger than normal this year, so we need to smooth the data to get the true story.
The FOMC's statement on April 29 mentioned the winter--"...economic growth slowed during the winter months"--but did not explicitly blame any of the first quarter's weakness on the extended cold and snowy weather. That was a change from the March statement, which made no mention of the weather and gave the distinct impression that policymakers had no firm view on why growth had "moderated".
April's consensus-beating retail sales figures fostered an impression that the recovery in consumer spending is in fine fettle, even though the rest of the economy is suffering from Brexit blues. Retailers have stimulated demand, however, by slashing prices at an unsustainable rate. With import prices and labour costs now rising, retailers are set to increase prices, sapping the momentum in sales volumes.
Brazil's April economic activity index--a monthly proxy for GDP--surprised to the downside, again. The IBC-BR index was unchanged month-to-month but contracted a dreadful 4.8% year-over-year, down from a revised 3.2% contraction in March. These results imply Q2 GDP of about -1.9% quarter-on-quarter, much worse than the 0.2% contraction in Q1. The release offers no details, but the report signals a continued steep, steady deterioration.
The German trade surplus increased slightly in May, following weakness in the beginning of spring. The seasonally adjusted surplus rose to €20.3B in May, from €19.7B in April; it was lifted by a 1.4% month-to-month jump in exports, which offset a 1.2% rise imports.
Friday's industrial production reports in the Eurozone were sizzling. In Germany, headline output rose 1.2% month-to-month in May--after a downwardly-revised 0.7% rise in April--which pushed the year-over-year rate up to a six-year high of 4.9%.
Mexico's headline inflation fell to a record low of 2.9% in May, down from 3.1% in April and below the middle of Banxico's inflation target, 2-to-4%, for the first time since May 2005. C ore inflation was unchanged at 2.3% in May; higher services prices were offset by a slowing in the rate of increase of goods prices to 2.4% from 2.7% in April, confirming that the pass-through effect from the MXN's depreciation has been very limited.
The May NFIB survey and the April JOLTS report, both released yesterday, paint a coherent, if not yet definitive, picture of labor market developments which should alarm the Fed. The data suggest that the true labor supply, in the eyes of potential employers, is much smaller than implied by the BLS's measures of broad unemployment.
History is repeating itself in France. When the Republican Nicolas Sarkozy defeated the Socialist candidate Ségolène Royal in April 2007, consumer sentiment briefly soared to a six-year high, before plunging to an all-time low a year later.
The drop in jobless claims to 3,839K in the week ended April 25, from 4,442K in the previous week, leaves the data still terrible, but markedly less terrible than at the 6,867K peak in late March.
Yesterday's Chinese PMI numbers disappointed forecasts across the board, failing to meet widespread expectations for either stability or a continued, albeit marginal, improvement in April.
China's official manufacturing PMI edged down to 50.8 in April, from 52.0 in March. The output sub- index stayed relatively high, inching down only to 53.7 from 54.1, and chiming with our initial take on the industrial production data for March.
Germany's external balance was virtually stable at the beginning of the second quarter. The seasonally adjusted trade surplus rose marginally to €23.9B in April from a revised €23.7B in March, mainly due to weakness in imports. Demand for goods abroad fell 0.2% month-to-month, which pushed up the surplus despite amid unchanged exports. Imports fell 1.5% year-over-year in April, up slightly from a 2.5% decline in March.
The CBO reckons that the April budget surplus jumped to about $179B, some $72B more than in the same month last year. This looks great, but alas all the apparent improvement reflects calendar distortions on the spending side of the accounts.
We can be reasonably sure that the headline May retail sales number will look quite strong, thanks to the surge in auto sales reported by the manufacturers last week. Sales of cars and light trucks soared past industry analysts' expectations to a nine-year high, rising 7.5% from their April level.
Swings in energy output continue to add volatility to French manufacturing data. Industrial production fell 0.9% month-to-month in April, equivalent to a 0.1% fall year-over-year. This was a weak report, even if we factor in the 0.3% upward revision to the March numbers,but it was also he avily tainted by a 10.8% month-to-month collapse in oil refining.
The German trade data on Friday completed a poor week for economic reports in the Eurozone's largest economy. The seasonally adjusted trade surplus fell to €22.1B in May, from €24.1B in April, mainly due to a 1.8% month-to-month fall in exports. Imports, on the other hand, were little changed.
Back in April 2012, Janet Yellen--then Fed Vice-Chair--spoke in detail about the labor market and monetary policy. The key point of her labor market analysis was that it was impossible to know for sure how much of the increase in unemployment--at the time, the headline rate was 8.2%--was structural, and how much was cyclical.
The headline April CPI, due today, will be boosted slightly by rising gasoline prices.
China's money and credit numbers for April were a mixed bag. M2 growth merely inched down, to 8.5% year-over-year, from 8.6% in March, keeping its gradual uptrend intact.
On the face of it, the timing of the drop in the E.C.'s measure of consumers' confidence, to its lowest level since July 2016 in April, is peculiar.
We're expecting the April ISM report today to bring yet more evidence that the manufacturing cycle is peaking, though we remain of the view that the next cyclical downturn is still some way off.
The Chancellor announced to great fanfare last July that a new National Living Wage-- NLW--would be introduced in April 2016 at 7.5% above the existing legal minimum for most workers. Companies can and will take a variety of actions to mitigate the impact on their costs.
Chief Eurozone Economist Claus Vistesen discussing the German Zew in April
Yesterday's EZ data showed that French households came out swinging as the economy reopened. Consumers' spending, ex-services, jumped by 36.6% month-to-month in May, driving the year-over-year rate up to -8.3%, from -32.7% in April.
The chances of a cut in official interest rates were boosted yesterday by the sharp fall in the business activity index of the Markit/CIPS report on services in February, to its weakest level since April 2013. Its decline, to just 52.8 from 55.6 in January, mirrored falls in the manufacturing and construction PMIs earlier in the week and pushed the weighted average of the three survey's main balances down to a level consistent with quarter-on-quarter GDP growth of just 0.2% in Q1.
Further compelling signs that the U.K. has lost its status as one of the fastest growing advanced economies were presented by the Markit/CIPS manufacturing survey, released yesterday. The PMI fell in February to 50.8--its lowest level since April 2013--from 52.9 in January.
Data this week clearly hint at a cyclical trough in Eurozone inflation in the first quarter. The advance estimate for April shows year-over-year inflation rising slightly to zero, up from -0.1% in March.
This is the final Monitor before we head out for our spring break, so we have added a page in order to make room to preview the employment report due next Friday, April 4. We expect a solid but unspectacular 175K increase in payrolls, slowing from February's unsustainable 242K, but still robust.
Yesterday's advance EZ CPI report bolstered the ECB doves' case for only marginal adjustments to the language on forward guidance at next week's meeting. Inflation in the euro area fell to 1.4% in May, from 1.9% in April, constrained by almost all the key components.
April's money and credit figures suggest that GDP growth has remained sluggish in Q2. Households' broad money holdings increased by just 0.3% month-to-month in April.
Money supply data in the euro area disappointed yesterday. Growth in M3 fell to 4.6% year-over-year in April, from 5.0% in March, due to an accelerated fall in the pace of narrow money growth. M1 rose 9.7% year-over-year, down from 10.1% in March. It was hit by lower growth in both overnight deposits and currency in circulation.
At next Wednesday's Budget, the Chancellor will have the rare pleasure of announcing lower-than- anticipated near-term borrowing forecasts. But hopes that he will prevent the fiscal tightening from intensifying when the new financial year begins in April look set to be dashed, just as they were at the Autumn Statement in November.
Chile's April retail sales data, released on Monday, show that private consumption started the second quarter on a solid footing. Sales rose 3.0% month-to-month, pushing the year-over-rate up to 7.9% from 1.4% in March and an average of 4.0% in Q1. The headline was boosted by a favourable calendar effect, as April this year had two more trading days than April 2015.
Last week's consumption releases were the first data from the real economy in the second quarter. In Germany, retail sales jumped 1.7% month-to-month in April, equivalent to a 1.0% rise year-over-year, an impressive start to the quarter. But our first chart shows that this still points to a moderate slowdown in Q2, consistent with mean-reversion following rapid gains in Q4 and Q1.
A rebound in quarter-on-quarter growth in households' spending in Q2, following the slowdown to just 0.2% in Q1, looks less likely following April's money data.
The first look at real consumers' spending for the second quarter will be discouraging, at least at the headline level. We expect to see a 0.1% month-to-month decline in real consumers' spending in April, below the +0.1% consensus.
Today brings the April PPI data, which likely will show core inflation creeping higher, with upward pressure in both good and services. The upside risk in the goods component is clear enough, as our first chart shows.
The Easter effect depressed services inflation more than markets expected in April, but the main downside surprise was the tepid rebound in non-energy goods inflation.
The core CPI inflation rate rose in April to 2.1% from 2.0%, thanks to unfavorable rounding, despite the below consensus 0.14% month-to-month print.
• U.S. - The April NFP report was terrible; reality is worse • EUROZONE - How to spy to a rebound in the EZ economy • U.K. - The BOE will boost its QE program in due course • ASIA - China's 2020 budget deficit is set to soar • LATAM - Brazil is suffering from the government's Covid-19 mismanagement
PPI inflation has finally started to soften, after having increased steadily from 2.0% in April, and holding steady at 3.0% in Q3.
The NY Fed's announcement yesterday restarts QE. The $60B of bill purchases previously planned for the period from March 13 through April 13 will now consist of $60B purchases "across a range of maturities to roughly match the maturity composition of Treasury securities outstanding".
Inflation in Germany rebounded last month, rising to plus 0.1% year-over-year in May, from minus 0.1% in April. We think the economy has escaped the claws of deflation, for now. Household energy prices fell 5.7% year-over-year in May, up from a 6.3% decline in April, and the rate will rise further. Base effects and higher oil prices point to a surge in energy inflation in the next three-to-six months.
Activity in the Mexican industrial sector cooled marginally at the start of the second quarter, but the drop was not as dramatic as the headlines suggested. Output fell 4.4% year-over-year in April, after a 3.4% increase in March.
April's labour market data show that slack in the job market is no longer declining, while wage growth still isn't recovering. As a result, we no longer think that the MPC will raise Bank Rate in August and now expect the Committee to stand pat until the first half of 2019.
Data yesterday showed that industrial production in the Eurozone stumbled in May. Production fell 1.2% month-to-month, driven by weakness in all major economies and falling output in all sub-industries. The poor headline follows an upwardly revised 1.4% jump in April, which means that production rose marginally in the first two months of the second quarter.
Evidence of a modest upturn in Brazilian consumers' spending continues to mount. Retail sales rose 1.0% month-to-month in April, pushing the year-over-rate up to +1.9%, from an upwardly-revised -3.2% in March.
Yesterday's industrial production report was grim reading, with volatility in Greece and the Netherlands, as well as revisions, throwing off our own, and the market's, forecasts. Output fell 0.4% month-to-month in May, well below the consensus and our expectation for a 0.2% rise, pushing the year-over-year rate higher to 1.6%, from a revised 0.9% in April.
German inflation eased in May, but the underlying upward pressure on the core is increasing. Yesterday's data showed that inflation fell to 1.5% year-over-year in May, from 2.0% in April, as the boost from the late Easter reversed. Inflation in leisure and entertainment services was driven down to +0.8%, from +3.3% in April, as a result of sharply lower inflation in package holidays and airfares.
Today's figures likely will bring the first real signs that the Brexit vote has had an adverse impact on the labour market. The employment balances of the key private-sector surveys weakened sharply in July, and recovered only partially in August. In addition, the three-month average level of job vacancies fell by 7K between April and July.
We expect today's consumer prices figures to show that CPI inflation picked up to 0.5% in May, from 0.3% in April, exceeding the 0.4% rate anticipated by both the consensus and the MPC, in last month's Inflation Report. We expect the increase to be driven by a jump in the core rate to 1.4%, from 1.2% in April.
CPI inflation increased to 2.9% in May, from 2.7% in April, exceeding the no-change expectation of both the consensus and the MPC, as well as our own 2.8% forecast.
Data today likely will show that manufacturing in the Eurozone was off to a strong start to the second quarter. Advance country data suggest that industrial production jumped 1.1% month-to-month in April, pushing the year-over-year rate up to 1.9% from 0.1% in March. The rise in output was driven mainly by Germany and France, but decent month-to-month gains in Ireland, Portugal and Greece also helped.
Evidence that Brazil's consumption recession has hit bottom seemed to vanish yesterday with the May retail sales report. Sales plunged 1.0% month-to-month, pushing the year-over-rate down to a terrible-looking -9.0%, from a revised -6.9% in April. Adding insult to injury, the month-to-month number for April was revised down by 0.2 percentage points.
Mexico's latest industrial production figures, released on Friday, showed that the recovery is stuttering. May output fell 0.9% year-over-year, down from the 1.2% gain in April. Total production was depressed by a 1.5% month-to-month drop in construction output, after two consecutive increases.
The downturn in equity prices deepened yesterday, with the FTSE 100 index closing at 5,537, 22% below its April 2015 peak. We remain unconvinced, however, that financial market turmoil is set to push the U.K. economy into a recession. We continue to take comfort from the weakness of the past relationship between equity prices and economic activity.
Germany continues to draw fire for its ballooning trade surplus, but momentum in net exports is easing. The seasonally adjusted trade surplus dipped marginally to a three-month low of €19.7B in April, from €19.8B in March, as stronger imports offset a modest rise in exports. The German trade surplus averaged €19.9B in the first four months of 2017, about 10% lower than the cyclical peak, in the middle of 2016.
Mexico's latest industrial production figures, released yesterday, showed that growth is stabilizing, but it likely will not accelerate any time soon. June output rose 1.4% year-over-year, rebounding from the 1.0% contraction in May, and matching April's gain. The increase in output was relatively broad-based, with solid gains in mining and utilities.
The seasonally adjusted trade surplus in Germany slipped to €19.6B in July, from €21.2B in June, its lowest since April, and we are confident that it has peaked for this cycle.
Mexico is the only major LatAm economy not struggling with inflation. The headline April CPI fell 0.3% month-to-month, with the year-over-year rate unchanged at 3.1%, in the middle o f Banxico's 2-to-4% target. Inflationary pressures have been broadly absent since the beginning of the year, with the annual core CPI rate slowing to 2.3% in April from 2.5% in March.
Mexican inflation pressures eased towards the start of Q2. Inflation fell to 2.5% year-over-year in April from 2.6% in March, due to a sharp fall in energy inflation--as a result of the introduction of new electricity tariffs in the warm season--and a fall in the rate of increase of fresh food prices. Depressed energy prices will continue to constrain inflation in coming months, but base effects will reduce the drag later this year.
The case for continuing to increase Bank Rate gradually--recently reiterated by MPC members Andy Haldane and Michael Saunders-- strengthened yesterday with the release of April's labour market report, which revealed renewed momentum in wage growth.
Brazil's benchmark inflation index, the IPCA, rose 0.7% month-to-month in May, above market expectations. The stickiness of some components explains the surprise upshift; food prices in particular rose by 1.4% in May, after a 1% increase in April. Housing also rose at a faster rate than we had expected, due mainly to a 2.8% jump in the electricity component, the largest single contributor to May's headline increase.
Yesterday's labour market data gave sterling a shot in the arm on t wo counts. First, the headline, three-month average, unemployment rate fell to just 4.5% in May, from 4.6% in April.
Yesterday's data showed that industrial production in the Eurozone accelerated at the end of spring. Output, ex-construction, jumped 1.3% month-to-month in May, much better than the downwardly-revised 0.3% rise in April; the rise pushed the year-over-year rate up to a six-year high of 4.0%.
Brazil's April CPI data this week showed that inflation pressures remain weak, supporting the BCB's focus on the downside risks to economic activity. Wednesday's report revealed that the benchmark IPCA inflation index rose 0.1% unadjusted month-to-month in April, marginally below market expectations.
The April CPI report today will be watched even more closely than usual, after the surprise 0.12% month-to-month fall in the March core index. The biggest single driver of the dip was a record 7.0% plunge in cellphone service plan prices, reflecting Verizon's decision to offer an unlimited data option.
Consumers' spending in the second quarter is still set to be less than great, thanks in part to unfavorable base effects from the first quarter, but a respectable showing of about 2¾% now seems likely. The core May retail sales numbers were a bit stronger than we expected, with gains in most sectors, and the upward revisions to April and March were substantial.
Eurozone manufacturing probably stalled at the start of the second quarter. We think industrial production rose a mere 0.1% month-to-month in April, lower than the 0.4% consensus forecast, and equivalent to a 0.8% increase year-over-year. Output ex-construction was up 0.8% in Germany, but this is likely to be offset by declines in France and Italy, and a hefty 3.2% fall in Greece.
The trend in retail sales no longer looks quite so flat, following yesterday's May report. The level of sales volumes in April was revised up by 0.3%.
Japan's monetary base growth showed further signs of stabilisation in May, at 8.1% year-over-year, edging up trivially from 7.8% in April.
We're looking forward to today's April NFIB survey of activity and sentiment in the small business sector with some trepidation.
We planned to write today about the rebound in housing market activity over the past few months, arguing that it is about to run out of steam in the face of the recent flat trend in mortgage applications. The Mortgage Bankers Associations' purchase applications index rocketed in the spring, but then moved in a narrow range from mid-April through late September. Then, out of the blue, the MBA reported a 27% leap in applications in the week ended October 2, taking the index to its highest level in more than five years.
We had hoped that the breathtaking doubling of initial jobless claims to 6.65M, in the week ended March 28, would be followed by a steep drop in the week ended April 4; the data will be released today.
New orders data indicate that German manufacturing enjoyed a strong start to the second quarter. Factory orders rose 1.4% month-to-month in April, equivalent to a modest 0.4% gain yearover- year, down from a revised 2.0% in March. The numbers put new orders on track for a solid 1.8% quarter-on-quarter gain in Q2--assuming no change in May and June--but these data are volatile, making this estimate highly uncertain.
German GDP growth jumped in the first quarter, but monthly economic data suggest the economy all but stalled in Q2. Yesterday's industrial production data are a case in point. Output slid 1.3% month-tomonth in May, pushing the year-over-year rate down to -0.4% from a revised 0.8% gain in April. Adding insult to injury, the month-to-month number for April was revised down by 0.3 percentage points
The German manufacturing data remain terrible. Friday's factory orders report showed that new orders plunged 2.2% month-to-month in May, convincingly cancelling out the 1.1% cumulative increase in March and April.
German GDP growth likely accelerated in the second quarter, following a disappointing 0.3% quarter-on-quarter expansion in Q1. Growth in the manufacturing sector remains modest, and the trend in consumers' spending remains solid. Industrial production was unchanged in May, pushing year-over-year growth to 2.1% from a revised 1.1% in April.
Yesterday's ECB meeting left investors with a lot of thinking to do. The central bank kept its key interest rate unchanged, but extended and tweaked its asset purchase program. QE was extended until December 2017, but the monthly pace of purchases will be reduced by €20B per month to €60B starting April next year.
The 7.8% month-on-month plunge in Japan's core machine orders in May re-emphasises the underlying weakness that we have been worrying about, after the 5.2% jump in April.
China's trade surplus collapsed unexpectedly in April, to $13.8B, from a trivially-revised $32.4B in March.
The undershoot in April payrolls, relative to the consensus, is a story of a fluke number in just one sector. Retail payrolls reportedly shrank by 3K, after rising by an average of 52K over the previous six months. Our first chart shows clearly that the retail payrolls are quite volatile over short periods, with sudden and often inexplicable swings in both directions quite common.
China's trade data looked more normal in April. The trade balance rebounded to a surplus of $28.8B in April, from a deficit of $5.0B in March. Exports also bounced back, rising 12.9% year-over-year in April, after a 2.7% decline in March.
Economic reports released yesterday indicate that the German economy was off to a solid start early in the second quarter. Industrial production rose 0.9% month-to-month in April, equivalent to a 1.4% increase year-over-year, up from a revised tiny 0.2% gain in March. This is the biggest annual jump in production since July last year, but the underlying trend is turning up only slowly, in line with the moderate improvement in survey data this year.
The rollover in bank lending to commercial and industrial companies probably is over. On the face of it, the slowdown has been alarming, with year-over-year growth in the stock of lending slowing to just 2.6% in April, from a sustained peak of more than 10% in the early part of last year.
The Mexican inflation rate soared at the start of 2017, but this is yesterday's story; the headline will stabilize soon and will decline slowly towards the year-end. May data yesterday showed that inflation rose to 6.2%, from 5.8% in April. Prices fell 0.1% month-to-month unadjusted in May, driven mainly by lower non-core prices, which dropped by 1.3%, as a result of lower seasonal electricity tariffs.
• U.S. - March payrolls were poor, they'll be terrifying in April • EUROZONE - Grim EZ PMI data in March • U.K. - The U.K. won't do better than the rest of Europe in Q2 • ASIA - A v-shaped recovery in China is not certain • LATAM - The incoming data will soon confirm a deep recession in the region
It's entirely possible--though impossible to prove--that the weather is responsible for the below-consensus April payroll number.
The fall in the services PMI to 53.8 in May, from 55.8 in April, is a setback for hopes that the slowdown in GDP growth in Q1 will be fleeting. Both business activity and orders rose at their slowest rates since February.
Eurozone consumers had a slow start to the second quarter. Retail sales increased a modest 0.1% month- to-month in April, but the March headline was revised up by 0.3 percentage points, and the year-over-year rate increased by 0.2pp to 1.7% due to base effects.
The latest U.K. PMIs were unambiguously dreadful. The manufacturing, construction and services PMIs all fell in April, and their weighted average points to quarter-on-quarter growth in GDP slowing to zero in Q2, from 0.4% in Q1. The U .K.'s composite PMI also undershot the Eurozone's for the second month this year.
Economic activity is slowing in Colombia. The ISE activity index--a monthly proxy for GDP--rose only 0.6% year-over-year in April, down from 2.3% in March, and we expect it to rise at this pace over the coming months. During the first quarter, the index rose at an average year-over-year rate of 3.0%.
Colombia started the second quarter strongly, with the ISE economic activity indicator--a monthly proxy for GDP--expanding a solid and surprising 3.6% year-over-year in April, up from 2.9% in March. The rate of growth is well above the 2.8% gain in Q1, con firming the country's resiliency in the face of lower oil prices. Still, growth has slowed sharply since the 4.4% increase in activity in 2014, as our first chart shows.
Activity surveys picked up across the board in April, offering hope that the slowdown in GDP growth--to just 0.3% quarter-on-quarter in Q1-- will be just a blip. The headline indicators of surveys from the CBI, European Commission, Lloyds Bank and Markit all improved in April and all exceeded their 2004-to-2016 averages.
Markets and the commentariat seemed not to like the April ADP employment report yesterday but we are completely indifferent. We set out in detail in yesterday's Monitor the case for expecting a below consensus ADP reading--in short, the model used to generate the number includes lagging official data, some of which were hugely depressed by the early Easter--so it does not change our 200K forecast for tomorrow's official number.
Brazil's industrial sector continues to suffer, despite September's report surprising marginally on the upside. Output contracted 1.3% month-to-month in September, after a 0.9% fall in August, pushing the year over-year rate down to -10.9% down from -8.8% in August. This is the biggest drop since April 2009. Output has fallen an eye-popping -7.4% year-to-date, and in the third quarter alone activity contracted by 3.2% quarter-on-quarter, in line with our vie w for a 1.2% contraction in real GDP for the third quarter.
Inflation pressures in Brazil are still easing rapidly. The mid-May unadjusted IPCA- 15 index rose just 0.2% month-to-month, much less than the 0.6% historical average for the month. Base effects pushed the year-over-year rate down to 3.8% from 4.1% in April. Food prices, healthcare and personal costs were the main drivers of the modest month-to-month increase.
Japan's average year-over-year wage growth slowed sharply in May, but this mainly was a correction of the April spike.
We've been hearing a good deal about the slowdown in the rate of growth of consumer credit in recent months, and with the April data due for release today, it makes sense now to reiterate our view that the recent numbers are no cause for alarm.
Today's consumer credit report for April likely will show that the stock of debt rose by about $15B, a bit below the recent trend. The monthly numbers are volatile, but the underlying trend rate of increase has eased over the past year-and-a-half, as our first chart shows. The slowdown has been concentrated in the non-revolving component, though the rate of growth of the stock of revolving credit--mostly credit cards--has dipped recently, perhaps because of weather effects and the late Easter.
German factory orders struggled in the second quarter. New orders were unchanged month-to-month in May, a poor headline following the revised 1.9% plunge in April. The year-over-year rate rose to -0.2%, from a revised -0.4% in April. The month-to-month rate was depressed by a big fall in domestic orders, which offset a rise in export orders.
The new fiscal year began on April 6, marking the post-election intensification of the fiscal squeeze for many households. The Office for Budget Responsibility estimates net tax and benefit changes will subtract 1.2 percentage points from year-over-year growth in households' disposable incomes in 2016.
The hard numbers in Eurozone manufacturing continue to lag the sharp rise in the main surveys. Data yesterday showed that German factory orders rose 1.0% month-to-month in May, only partially rebounding from a downwardly revised 2.2% plunge in April.
Since April, the presidential elections in Brazil have dominated local discourse, prompting several market moves.
April wasn't so bad for Korean exports, which are starting to bottom out in real terms
In one line: Non-mining activity collapses in April; Q2 is a write-off.
In one line: Weak, but the full hit will come in April.
In one line: Poor, but April will be much worse.
China's trade surplus falls unexpectedly in April, thanks partly to a bump in imports. Japan's services PMI falls despite holiday boost. The BoJ remains in a holding pattern. Korea's current account surplus rose in March, but its overall downtrend remains intact.
State of emergency destroyed Japanese overtime pay in April. M2 growth in Japan hasn't been this strong since the early 90s. No relief for Japanese tool orders in May, despite the phased withdrawal of the emergency declaration.
China's exporters fulfil old orders; new orders have plunged; Caixin survey underlines that smaller firms are still sputtering; An unsurprisingly modest start for "unlimited QE" in Japan; Expect much more trade damage to Korea's current account surplus in April
China's trade surplus probably has peaked. Chinese FX reserves jump in May, thanks primarily to valuation effects. Chinese FX reserves jump in May, thanks primarily to valuation effects. April should be the low of Japan's current account surplus.
In one line: Lockdowns ought to slow case growth by early April.
In one line: The advance goods deficit rose to $71.4B in April from $70.9B in March, better than the consensus, $73.0B.
In one line: The biggest one-month drop in more than six years, but April will be much worse.
China's Unsustainable V-Shaped Recovery...Japan's Q1 GDP Contraction Is Just A Taster...Korea's Grim April Exports Is A Warning Shot...India's Lockdown Will Kill Q2, Despite Relaxation
In one line: Yet more evidence that the economy was less-bad in May than in April.
In one line: Old news; April will be much worse.
In one line: Paying the price for the slow decline in Covid-19 infections from April's peak.
In one line: Great, but March and April, at least, will be grim.
Rapidly falling wages in Japan rule out a V-shaped spending bounce. May confirms that Korea's current account deficit in April was just a one-off.
The hit from oil prices has just started; CPI deflation is imminent in Korea. Korea's PMI descends further, but April could mark the low
Our caution over China's March industrial production spike was justified. Chinese retail sales growth hits lows. Chinese FAI growth suggests private sector policy loosening isn't working. Japan's M2 growth upturn is a welcome break, but needs to be sustained. Korean unemployment jumps in April, showing the limits of the government's hiring spree.
Chinese production surprises in April, as catch-up growth and inventory build continue; Disappointing sales headline in China masks respectable short-term trends; Recovery in secondary investment in China still lagged behind tertiary capex; PPI deflation has largely bottomed out, but don't expect a quick exit
Short-term trends in Chinese industry continued to soften in May, with catch-up growth fading, No noticeably May Day lift, as retail sales in China continue to fall behind, Chinese investment looks to have taken a breather in May, Don't put too much stock into the stronger increase in Chinese home prices, Japan's tertiary index should rebound from April, but Q2 is a write-off
April revision means little to the overall damage done by Japan's state of emergency
Sharper energy and education deflation offset a jump in food prices in Tokyo. Lockdowns in Europe and the U.S. knock out Korean exports in April.
Japan's tertiary index shows Q2 services strength was merely an April leap. Japan's PPI is slated for more deflation.
Korean inflation surprises to the upside in April. Manufacturing surveys in Korea are turning up.
The BoJ keeps it promises vague. Japan's April is turning out quite nicely. PPI inflation in Korea slipped in May, and is heading for deflation in Q3.
China's manufacturing PMI was poised for major disappointment... the trade war impact is clear. Don't be fooled by the relative stability of China's non-manufacturing PMI. Japan's March unemployment uptick was early; April was payback. Japan's CPI inflation has peaked. Japan's industrial production ticks up after extreme weakness; don't hold your breath for the recovery. Japan's consumers in poor shape, but maybe it's not that bad. The upswing in Korean industrial production likely to take a breather this month. The BoK holds firm, despite rising calls for a rate cut.
Korea's current account deficit in April probably was the low.
Korean IP was due a bounce after February's sourcing woes... that will pale in comparison to the April hit.
March was painful, but Japan's all-industry index likely was hit much harder in April.
Japan's trade balance should recover as domestic weakness sets in; Japan's manufacturing PMI undermines H2 recovery hopes; Japan's services PMI paints a damning picture of Q2; Korea's export recovery from the April low will be more gradual than the descent; A lot more downside left for PPI deflation in Korea before Q3 trough
April should be as bad as it'll get for Japan's all-industry index.
If the underlying trend in payroll growth is about 200K, then a weather-depressed 98K reading needs to be followed by a rebound of about 300K in order fully to reverse the hit. But the consensus for today's April number is only 190K, and our forecast is 225K.
Ms Keiko Fujimori, the candidate of Peru's conservative Fuerza Popular party, seems on course to win the first round of the presidential election this Sunday, April 10. According to the latest Ipsos poll, the daughter of former President Alberto Fujimori continues to lead the race, with the support or about 34% of voters.
The April international trade numbers were startlingly, and surprisingly, horrible. The deficit in trade in goods leaped by $6.2B -- the biggest one-month jump in two years -- to $67.1B, though the headline damage was limited by a sharp narrowing in the oil deficit, thanks to lower prices, and a rebound in the aircraft surplus.
The upturn in Mexico's trade balance in recent months stalled in May, but the underlying trend is still improving. Data yesterday showed that the seasonally adjusted deficit rose to USD700M in May, after a USD15M gap in April. Imports rose 2.9% month-to-month, offsetting a mere 0.7% increase in exports.
Youth unemployment remains a blemish on the Eurozone economy, despite an increasingly resilient cyclical recovery. The unemployment rate for young workers aged 15-to-24 years stood at 18.4% at the end of April, chiefly due to high joblessness in the periphery.
Chinese industrial profits growth rose to 16.7% year-on-year in May, from 14.0% in April. But this headline is highly misleading. Profits growth data are about as cyclical as they come so taking one point in the year and looking back 12 months is very arbitrary. Moreover, the data are very volatile over short periods.
This week's data will offer the first clear hard evidence of the Covid-19 shock to the EZ economy. Thursday's calendar is the main event, with advance Q1 GDP data, March EZ unemployment numbers, and the April CPI report.
We were wrong about headline durable goods orders in April, because the civilian aircraft component behaved very strangely.
After a busy week of data, and a holiday weekend ahead, it's worth stepping back a bit and evaluating the arguments over the timing of the next Fed hike. The first question, though, is whether the data will support action, on the Fed's own terms. The April FOMC minutes said: "Most participants judged that if incoming data were consistent with economic growth picking up in the second quarter, labor market conditions continuing to strengthen, and inflation making progress toward the Committee's 2 percent objective, then it likely would be appropriate for the Committee to increase the target range for the federal funds rate in June".
Japan's May retail sales rebound was underwhelming at a mere 0.3% month-on-month, after a 0.1% fall in April.
Business surveys coming out of the Eurozone have been remarkably strong recently. The composite PMI for the Eurozone jumped to 56.7 in March--its highest level since April 2011--from 56.1 in February. Germany's IFO business climate index leaped to a 67-month high in March.
Yesterday's French INSEE consumer confidence data provided a fascinating glimpse into the reality for households during these strange times. The headline index fell by "just" eight points in April, to 95 from 103 in March, comfortably beating the consensus for a crash to 80.
Household sentiment in France continues to improve, consistent with tailwinds from low energy prices and accommodative monetary policy. INSEE's measure of consumer confidence rose to 94 in April, up from 93 in March, the highest since November 2010.
BanRep surprised everyone late Friday, moving ahead of the curve by starting a tightening cycle that had been expected to begin later in the year or in Q1. But the seven-board member succumbed in the face of persistent inflationary pressures, and voted unanimously to hike the main interest rate by 25bp to 4.75%, the first move since April 2014.
Markets responded to yesterday's disappointing GDP figures by pushing back expectations for the first rise in official interest rates even further into 2017. The first rate hike is now expected--by the overnight index swap market--in April 2017, two months later than anticipated before the GDP release. The figures certainly look weak--particularly when you scratch below the surface--and we expect growth to slow further over the coming quarters. But we don't agree they imply an even longer period of inaction on the Monetary Policy Committee.
CPI inflation last Friday gave Japanese policymakers a break from the run of bad data, jumping to 0.9% in April, from 0.5% in March.
We will be paying special attention today to the EC sentiment survey for Italy, where the headline index has climbed steadily so far this year. It was unchanged at an eight-year high of 106.1 in April, and even if it fell slightly in May--we expect a dip to 105.0--it still points to an upturn in economic growth.
Inflation in Mexico surprised to the upside in April, but the underlying picture has improved rapidly over recent months.
the past few observations make clear. Real spending jumped by 0.5% in March, rebounding after its weather-induced softness in February, before stalling again in April. Then, in May, the s urge in new auto sales to a nine-year high lifted total spending again, driving a 0.6% real increase.
Eurozone PMI data yesterday presented investors with a confusing message. The composite index fell marginally to 52.9 in May, from 53.0 in April, despite separate data that showed that the composite PMIs rose in both Germany and France. Markit said that weakness outside the core was the key driver, but we have to wait for the final data to see the full story.
Last week's advance PMI data suggest that economic activity in the Eurozone was stable at the beginning of Q2. The composite EZ PMI fell trivially to 53.0 in April, from 53.1 in March, because a dip in manufacturing offset a small rise in the services index.
We have been bullish about the housing market for some time now--since Google searches for "new homes" and mortgage demand began to pick up, in late April--but we might not have been bullish enough.
A grim-looking headline durable goods orders number for April seems inevitable today, given the troubles at Boeing.
Yesterday's barrage of survey data were a mixed bag. The composite EZ PMI edged higher in May to 51.6, from 51.5 in April, but the details were less upbeat, and also slightly confusing.
April's public finances indicate that the economy has remained weak in Q2, casting doubt on the suggestion from recent business surveys that the slowdown in Q1 was just a blip.
Korea's 20-day export growth came in weaker than we anticipated earlier this week. Granted, year-over- year growth rebounded to 14.8% in May, from 8.3% in April.
Last week's news that the composite PMI collapsed to 47.7 in July--its lowest level since April 2009--from 52.4 in June is the first clear indication that the U.K. is heading for a recession.
Financial markets' inflation expectations have risen sharply since the spring. Our first chart shows that the two-year forward rate derived from RPI inflation swaps has picked up to 3.8%, from 3.5% at the end of April.
Mortgage approvals by the main high street banks collapsed to 36.1K in December--the lowest level since April 2013--from 39.0K in November, according to trade body U.K. Finance.
Today brings more housing market data, in the form of the Case-Shiller home price report for April.
LatAm currencies and stock markets have suffered badly in recent weeks, but Monday turned into a massacre with the MSCI stock index for the region falling close to 4%. Markets rebounded marginally yesterday, but remain substantially lower than their April-May peaks. Each economy has its own story, so the market hit has been uneven, but all have been battered as China's stock market has crashed. The downward spiral in commodity prices--oil hit almost a seven-year low on Monday--is making the economic and financial outlook even worse for LatAm.
Yesterday's German IFO survey suggests that economic momentum in the Eurozone's largest country remained modest at the start of Q2. The headline business climate index fell trivially to 106.6 in April, from 106.7 in March, lower than the consensus expectation of an increase to 107.2.
Retail sales jumped by 1.6% month-to-month in April, more than reversing the 1.2% March decline. Even so, the level of sales merely matched their November peak and the underlying trend still looks flat, as our first chart shows.
April's public finances show that borrowing still is falling more slowly than the Chancellor had envisaged. This casts further doubt over whether he will be able to keep his pledge to run a budget surplus before the end of this parliament in 2020.
Housing market data yesterday fostered the view that prices are vulnerable to a fall following April's increase in stamp duty--a transactions tax-- and before the E.U. referendum in June. Political uncertainty, however, has rarely had a pervasive or sustained impact on prices in the past.
The MPC will be looking for the Q1 national accounts and April's index of services data, both released on Friday, to support its view that the economy hasn't lost momentum this year.
We were surprised to see Japan's services PMI edging up to 51.9 in June, from 51.7 in May. We attributed apparent service sector resilience in April and May to the abnormally long holiday this year.
Friday's Brazilian industrial production data were relatively positive. Output was unchanged month-to-month in May, and April's marginal gain was revised slightly higher. The flat monthly reading pushed year-over-year growth in output up marginally to -8.9% from -9.1%. May production rose month-to-month in two of the four major categories.
The Caixin manufacturing headline was unremarkable, but the input price index signals that PPI inflation is set to rise again in May, to 4.0%-plus, from 3.4% in April.
Industrial production data yesterday confirmed downside risks to Q4's GDP data in Brazil. Output fell 0.7% month-to-month in October, the fifth consecutive decline, pushing the year-over-year rate down to -11.2%, from -10.9% in September. This was the biggest drop since April 2009, when output collapsed by 14.2% during the global financial crisis. The October details were even worse than the headline, as all three broad-measures fell sharply.
Today's Sentix survey of Eurozone investor sentiment likely will remain downbeat. We think the headline index rose only trivially, to 6.0 in April from 5.5 in March, and that the expectations index was unchanged at 2.8. Weakness in equities due to global growth fears and negative earnings revisions likely is the key driver of below-par investor sentiment.
Advance CPI data yesterday continue to indicate that inflation pressures remain depressed in the Eurozone's largest economy, for now. Inflation in Germany rose slightly in May, but only to 0.1% year-over-year, from -0.1% in April. The downward pressure on the headline from the crash in oil prices remains significant. Energy prices fell 7.9% year-over-year, slowing slightly from the 8.5% drop in the year to April.
Housing market activity has weakened sharply over the last two months. Indeed, figures this week likely will reveal that mortgage approvals plunged in April and that house price growth slowed in May. The increase in stamp duty for buy-to-let purchases at the start of April and Brexit risk, however, entirely explain the slowdown.
The Caixin manufacturing PMI was steady in May, at 50.2, in contrast to the official gauge published on Friday, which dropped to 49.5, from April's 50.2.
Money supply dynamics in the Eurozone were broadly stable last month. M3 rose 5.0% year-over-year in May, accelerating slightly from a 4.9% increase in April, in line with the trend since the middle of 2015.
The nosedive in the Markit/CIPS manufacturing PMI in April provides an early sign that GDP growth is likely to slow even further in the second quarter. The MPC, however, looks set to keep its powder dry. We continue to think that the next move in interest rates will be up, towards the end of this year.
Yesterday's EZ consumers' spending data were mixed. Retail sales in the euro area fell by 0.3% month-to-month in May, extending the slide from a revised 0.1% dip in April.
In Friday's Monitor--see here--we argued that the official labour market data were less than accurate at the moment, and we'd make the same point about the CPI. The April report showed that EZ headline inflation fell to 0.4% year-over-year, from 0.7% in March, while the core rate dipped by 0.1pp, to 1.0%.
Korean exports hit a brick wall in April, unsurprisingly, as lockdowns across the non- China world dealt a body blow to demand.
We recommend that investors take yesterday's inflation data in the Eurozone with a pinch of salt. The headline rate slipped to 1.2% in April, from 1.4% in March, hit by a slide in core inflation to 0.7%, from 1.0%.
The failure of the Markit/CIPS services PMI to rebound fully in April, following its fall in March, provides more evidence that the economy is in the midst of an underlying slowdown.
Today's advance EZ CPI report likely will show that inflation pressures eased in May. We think inflation slipped to 1.5% year-over-year, from 1.9% in April, as the boost to the core rate from the late Easter faded.
The April foreign trade numbers strongly support our view that foreign trade will make a hefty positive contribution to second quarter GDP growth, after subtracting a massive 1.9 percentage points in the first. The headline April deficit fell further than we expected, thanks in part to an unsustainable jump in aircraft exports and a decline in the oil deficit, but the big story was the 4.2% plunge in non- oil imports.
In the wake of April's 0.2% increase in real consumers' spending, and the upward revisions to the first quarter numbers, we now think that second quarter spending is on course to rise at an annualized rate of about 3.5%.
Brazil's current account deficit rose to USD6.9B in April, from USD5.8B in March. The deficit totaled USD100.2B, or 4.5% of GDP on a 12-month rolling basis, marginally better than 4.6% in March; the underlying trend is flat. The services and income accounts improved slightly compared to April last year.
The Atlanta Fed's GDP Now estimate for second quarter GDP growth will be revised today, in light of the data released over the past few days. We aren't expecting a big change from the June 24 estimate, 2.6%, because most of the recent data don't capture the most volatile components of growth, including inventories and government spending. The key driver of quarterly swings in the government component is state and local construction, but at this point we have data only for April; those numbers were weak.
Mexico's economy hit a sticky patch in the first quarter, with confidence slipping, employment growth slowing and the downward trend in unemployment stalling. Indeed, the headline unemployment rate rose to 4.5% in May from 4.3% in April. The seasonally adjusted rate, though, was little changed at 4.4%, with a stable participation rate.
Friday's money supply data in the euro area show that liquidity support for the economy remained firm mid-way through Q2. Headline M3 rose by 8.9% year-over-year in May, accelerating from a revised 8.2% increase in April, and extending its ascent from around 5% before the Covid-19 shock.
Data released on Friday in Mexico strengthened the case for further interest rate cuts in Q3. The monthly IGAE economic indicator for April, a proxy for GDP, plunged 19.9% year-over-year, a record drop since the series started in 1993, and down from -2.3% in March.
Money supply data today should provide further confirmation of a moderate upturn in the Eurozone credit cycle. We think broad money growth, M3, accelerated to 5.0% year-over-year in April, up from 4.6% in March.
Tokyo CPI inflation edged down to 0.4% in May, from 0.5% in April.
The unemployment rate hit its post-1970 low in April 2000, at the peak of the first internet boom, when it nudged down to just 3.8%. The low in the next cycle, first reached in October 2006, was rather higher, at 4.4%.
The forward-looking indices of China's Caixin manufacturing PMI for April attracted more attention than the headline, which was a bit of a non-event; it rose trivially 51.1, from 51.0 in March.
Manufacturers in the Eurozone are still suffering, but yesterday's final PMI data for April offered a few bright spots.
Brazil industrial production continues to edge lower, falling 1.2% month-to-month in April, a 7.6% year-over-year drop. In March, output was down only 3.4% year-over-year, but the data are volatile in the short-term. The trend is about -7%, down from -3.8% in the second half of last year.
The downside surprise in April payrolls reflected weakness in just three components--retail, construction, and government--compared to their prior trends. Of these, we think only the construction numbers are likely to remain soft in May. Had it not been for the Verizon strike, then, we would have expected payrolls to rise by just over 200K in May, but the 35K strike hit means our forecast is 170K.
Survey and money supply data remain consistent with an improving Eurozone economy. Yesterday's EC sentiment index fell to 103.7 in April, from 103.9 in March, due to weakness in France and Germany, but it is consistent with GDP growth of about 0.4% quarter-on-quarter in Q2.
The jobless rate fell back to 2.8% in June after the surprise rise to 3.1% in May. This drop takes us back to where we were in April before voluntary unemployment jumped in May.
Chief U.K. Economist Samuel Tombs on the U.K. PMI data, April
Is Covid-19 the main factor behind Mexico's poor economic performance?
In one line: The Brexit extension brings some relief.
Will the EU's recovery fund be delayed?
Chief US economist Ian Shepherdson on the latest Jobs report
Chief US economist Ian Shepherdson on the latest Jobs report
Chief US economist Ian Shepherdson on the latest Jobs report
Chief U.K. Economist Samuel Tombs on U.K. Q2 GDP
Chief Eurozone Economist Claus Vistesen comments on the Eurozone's Money Supply
Chief Eurozone Economist Claus Vistesen on European Car Sales
Chief U.S. Economist Ian Shepherdson on U.S. payroll gains
Samuel Tombs on U.K. House Prices
Chief U.S. Economist Ian Shepherdson discussing Global debt
Chief Eurozone Economist Claus Vistesen on Eurozone Current Account
Chief U.K. Economist Samuel Tombs on U.K Retail Sales in May
Senior Asia Economist Miguel Chanco on Japan GDP, Q2
Claus Vistesen on Eurozone Business Lending
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