On Monday 17th: Chinese Industrial Production YoY and Chinese Retail Sales YoY
On Tuesday 18th: Australian RBA Interest Rate Decision, German ZEW Economic Sentiment Index, Japanese Balance of Trade and American Retail Sales MoM
On Wednesday 19th: UK Inflation Rate YoY
On Thursday 20th: UK BoE Interest Rate Decision, American Building Permits Prel and Japanese Inflation Rate YoY
On Friday 21st: UK Retail Sales MoM and German HCOB Manufacturing PMI Flash
Monday 17th of June
China's industrial sector defied expectations in April 2024, with production expanding by a robust 6.7% year-on-year.This figure outpaced market forecasts of 5.5% and marks a significant acceleration compared to the 4.5% growth observed in March. This positive surprise suggests a potential strengthening of China's manufacturing activity. But will it continue in May? The new data will be released at 02:00 AM GMT.
China's retail sector witnessed a slowdown in growth in April 2024. Year-on-year retail sales rose by 2.3%, falling short of market expectations of 3.8%. This marks a moderation from the previous month's 3.1% increase and represents the weakest growth in the 15-month streak of rising retail sales. This highlights the ongoing challenges faced by the Chinese government in reviving weak consumer spending, despite various stimulus measures being implemented.
It remains to be seen if these measures will start to have a positive impact. The upcoming retail sales data for May, scheduled for release at 02:00 AM GMT, will shed light on whether consumer spending shows any signs of picking up.
Tuesday 18th of June
The Reserve Bank of Australia (RBA) opted to hold its cash rate steady at 4.35% during its May meeting, a decision widely anticipated by markets. This marks the fourth consecutive meeting where borrowing costs haven't budged,following a series of hikes that began in November 2023.
The RBA acknowledged the challenges in bringing inflation back down to its target range of 2-3%. While cost pressures are easing, the pace of this decline has been slower than expected. This is partly due to persistent inflation in the service sector. Additionally, there's uncertainty surrounding how long it takes for policy changes to impact the economy (known as lags) and how businesses and workers will adjust their pricing and wage expectations in response to a slowing economy.
The RBA emphasised the need to be certain that inflation is definitively moving towards its target range. They remain vigilant about potential upside risks and reiterated they're keeping all options open as they continue to monitor economic data.
While no changes to the cash rate are expected today, market participants will be closely analysing the RBA's comments on recent economic developments for clues about the direction of monetary policy when the monetary policy decision will be released at 4:30 AM GMT.
German economic sentiment surged in May 2024, reaching its highest level in over two years. The ZEW Indicator of Economic Sentiment climbed to 47.1, exceeding analyst expectations of 46 and marking a significant improvement from April's reading of 42.9. This positive trend extends a ten-month streak of rising confidence among financial experts.
Several factors are fueling this optimism.
Signs of a rebounding German economy, coupled with stronger-than-anticipated GDP growth in Q1 2024, are boosting confidence. Additionally, improving economic conditions in the Euro Area and China are contributing to a more positive outlook. Notably, expectations for domestic consumption, construction, and the machinery sector have all witnessed substantial increases.
However, market participants predict a strong potential decline in the ZEW Economic Sentiment Index to 37, set for release at 9:00 AM GMT, which suggests they might anticipate a moderation in the current surge of optimism.
Japan's trade deficit widened in April 2024, exceeding market expectations, and reached JPY 462.5 billion, higher than the JPY 429.79 billion recorded in April 2023 and surpassing analyst predictions of a JPY 339.5 billion deficit.
This news comes despite positive developments on the export front. Exports grew by 8.3% year-on-year, marking the fifth consecutive month of increase. However, this figure fell short of forecasts for an 11.1% jump. Continued shipments to major trading partners like the US and China were a key driver of this growth, reaching a total of JPY 8,980.75 billion.
On the import side, they surged by 8.3% year-on-year, representing the strongest growth in 14 months and reaching a four-month peak of JPY 9,443.26 billion. This upswing, fueled by higher purchases of mineral fuels, reverses a trend of decline observed in March, when imports dipped by a revised 5.1%.
The next trade data release for the month of May, scheduled for 11:50 PM GMT, will reveal whether the trade deficit narrows, widens further, or remains relatively stable.
Consumer spending in the United States showed signs of stagnation in April 2024, while market expectations were for a 0.4% increase, suggesting a potential pause in consumer spending growth. Retail sales remained flat month-over-month, following a downward revision to March's data which revealed a slightly steeper decline of 0.6% compared to initial estimates.
Further dampening the outlook, sales figures for seven out of thirteen retail categories dipped in April.
Market participants’ forecast for May predict a modest increase of 0.1% in retail sales month-over-month, suggesting they believe consumer spending might pick up slightly in the coming month.
Wednesday 19th of June
Inflation in the UK took a welcome turn in April 2024, dropping to its lowest level in nearly three years. The annual inflation rate fell to 2.3%, a significant decline from March's 3.2%. Several factors contributed to this positive trend.
The largest downward pressure came from a decrease in gas and electricity costs, bringing some relief to consumers. Additionally, price increases for food, recreation, and cultural activities also slowed down.
However, it wasn't all good news. The decline in some categories was partially offset by rising costs in others. The most significant upward contributor was the price of motor fuels, which saw a notable increase. Prices also rose at a faster pace for restaurants and hotels, alongside miscellaneous goods and services.
Despite these mixed signals, market participants remain optimistic. Their forecasts for May, to be released at 6:00 AM GMT, predict a further decline in inflation, potentially reaching 1.9%, which suggests they believe the recent trend of easing inflation is likely to continue.
Thursday 20th of June
The Bank of England (BoE) opted to hold interest rates steady at 5.25% in May at their highest level since 2008. However, there were signs of a potential shift within the committee. While the decision was unanimous, two members favoured a small reduction of 0.25 percentage points, compared to just one member in the previous meeting.
This subtle difference highlights a growing debate within the BoE. The central bank revised its inflation forecasts downwards, while simultaneously boosting its outlook for economic growth. Their projections now predict a significant decrease in the Bank Rate, potentially falling to 3.75% by the end of the forecast period.
The UK economy appears to be in a precarious position. Growth is expected to remain sluggish, with the first two quarters of 2024 projected at 0.4% and 0.2% respectively. This suggests demand might not be strong enough to fully utilise the economy's potential.
Despite these signs of slowing inflation and a fragile economy, the BoE continues to emphasise the need for a restrictive monetary policy. Their primary goal remains bringing inflation back down to the 2% target in a sustainable manner. The central bank acknowledges potential risks arising from geopolitical factors, but maintains its commitment to adjusting policy as economic data dictates.
Looking ahead, market participants anticipate the BoE to maintain its current stance, but the message surrounding monetary policy trajectory might change when the decision is announced at 11:00 AM GMT.
The US housing market continued to face headwinds in April 2024, with building permits declining for the second month in a row. Permits fell by 3% to a seasonally adjusted annual rate of 1.44 million, marking the lowest level since December 2022. This data highlights the ongoing challenges in the housing sector.
Elevated borrowing costs and limited supply are putting a damper on new construction activity. These factors are making it more expensive and difficult to build new homes, which could potentially restrict the availability of houses on the market.
Despite the recent decline, market participants' forecasts predict an increase in building permits to 1.47 million, suggesting they believe the downward trend might not persist. However, it remains to be seen if this prediction holds true when the data is released at 12:30 PM GMT.
Japan's inflation showed signs of further moderation in April 2024, dipping to an annual rate of 2.5%. This marks the second consecutive month of decline, following a previous reading of 2.7%.
Several factors contributed to this easing of price pressures. Notably, food prices witnessed their slowest growth in 19 months. Additionally, costs for furniture & household utensils, healthcare, and cultural activities also saw some relief.There was an even more significant development - education prices fell for the first time since May 2021.
However, the slowdown wasn't uniform across all categories. Inflation remained stable for clothes, housing, and miscellaneous goods and services. Transportation costs and communication prices, on the other hand, accelerated.
While the annual inflation rate is moderating, the monthly Consumer Price Index (CPI) remained at 0.2% in April, matching March's figure. This represents the highest monthly increase since October 2023. The core rate fell to 2.2%, its lowest level since January 2024.
Market participants will be closely scrutinising the upcoming inflation data release, scheduled for 11:30 PM GMT. This data will shed light on whether the recent trend of easing inflation continues or if there's a potential for renewed upward pressures, which might also influence the Bank of Japan’s stance on its monetary policy.
Friday 21st of June
Annual UK retail sales experienced a significant setback in April 2024, plunging 2.3% month-over-month. This comes after a previously reported 0.2% decline in March (which was revised downwards), and falls far short of market expectations for a simple 0.4% drop. This marks the steepest decline in retail sales in four months, with a majority of sectors witnessing a fall in sales volume.
Compared to the previous three-month period, retail sales dipped by 0.7% in April. The data for May, due for release at 6:00 AM GMT, might show a potential rebound, with a projected increase of 1.9% in month-over-month retail sales. However, it remains to be seen if this optimism is justified, or if consumer spending will remain subdued.
The German manufacturing sector exhibited tentative signs of improvement in May 2024, with the HCOB Manufacturing PMI holding steady at 45.4, the highest reading in four months (up from 42.5 in April). This suggests a potential stabilisation of business conditions.
Several factors contributed to this modest recovery. The rate of decline in both output and new orders slowed significantly. Notably, export sales showed signs of near-stabilisation, with manufacturers reporting improved demand from key markets like China and the US. While purchasing activity among goods producers continued to decrease, the rate of decline eased in mid-second quarter, likely reflecting ongoing efforts to reduce inventory levels (destocking).
Interestingly, competitive pressures led to a decrease in both input costs (the cost of raw materials) and output prices (the price at which finished goods are sold). This could be a positive sign for consumers, potentially indicating a slight easing of inflationary pressures.
Despite these improvements, there are still areas of concern. Business confidence regarding future growth prospects,though slightly improved, remains cautious. Additionally, employment levels within the sector continued to decline,reflecting a lack of pressure on operating capacity. This suggests that factories are not yet operating at full potential.
Market participants forecast for the June HCOB Manufacturing PMI Flash data that will be released at 7:30 AM GMT a further rise to 46.8. This suggests they believe the recent trend of stabilisation might continue, with the German manufacturing sector potentially entering a period of modest growth.
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