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UK PMI manufacturing finalized at 47.1, downturn deepened

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    ActionForex.com
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    UK PMI Manufacturing was finalized at 47.1 in May, down from April’s 47.8, hitting the lowest level in four-months. S&P Global noted the output contracted in investment and intermediate goods sectors. Input costs fell and supply chain pressured subsided.

    Rob Dobson, Director at S&P Global Market Intelligence, said:

    “The UK manufacturing downturn deepened in May, with output, new orders and employment all falling at increased rates. Manufacturers are finding that any potential boost to production from improving supply chains is being completely negated by weak demand, client destocking and a general shift in spending in the UK away from goods to services.

    ” These factors are also driving a broad decrease in demand from overseas amid reports of lost orders from the US and mainland Europe. The retrenchment in export demand is also being exacerbated by some EU clients switching to more local sourcing to avoid post-Brexit trade complications.”

    Full UK PMI manufacturing release here.

    Eurozone PMI manufacturing finalized at 44.8, weakness in demand increasingly evident

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      ActionForex.com
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      Eurozone PMI Manufacturing was finalized at 44.8 in May, down from April’s 45.8, hitting the worst level in 36 months. PMI Manufacturing output dropped from 58.5 to 46.4, a 6-month low. Factor gate prices declined fro the first time since September 2020.

      Looking at some member states, Ireland (47.5), Italy (45.9), the Netherlands (44.2) and Germany (43.2) were all at 36-month low. Austria hit 37-month low at 39.7. France recovered to 2-month high at 45.7.

      Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said: “The weakness in demand in the manufacturing sector, which has become increasingly evidence since the beginning of the year in falling PMI readings, has now led the surveyed companies to reduce their production for the second month in a row”.

      Full Eurozone PMI manufacturing release here.

      China Caixin PMI manufacturing rose to 50.9, activity improved

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        ActionForex.com
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        China Caixin PMI Manufacturing rose from 49.5 to 50.9 in May, signaling the first improvement in the health of the sector since February. Caixin noted stronger increase in output as firms saw fresh upturn in new business. Input costs fell solidly. Employment, however, continued to decline as business confidence softened.

        Wang Zhe, Senior Economist at Caixin Insight Group said: “In a nutshell, manufacturing activity improved in May. Both supply and demand expanded, but employment sank to a three-year low. Businesses stepped up purchasing, inventories of raw materials grew marginally, logistics picked up, prices continued to slump, and manufacturers’ optimism wavered.”

        Full China Caixin PMI Manufacturing release here.

        Japan PMI manufacturing finalized at 50.6, a decisive turnaround

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          ActionForex.com
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          Japan PMI Manufacturing was finalized at 50.6 in May, up from April’s 49.5. That’s the first expansionary reading since October 2022, signalling a modest overall improvement in operating conditions. Also, business optimism reached highest level since January 2022, while supplier performance stabilized.

          Tim Moore, Economics Director at S&P Global Market Intelligence, said: “The latest au Jibun Bank PMI survey highlights a decisive turnaround in manufacturing sector performance during May and brings to an end a six-month period of weakening business conditions.”

          Full Japan PMI manufacturing release here.

          IMF sees opportunity for Japan to re-anchoring Inflation Expectations

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            ActionForex.com
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            IMF chief economist, Pierre-Olivier Gourinchas, suggested that a unique opportunity may be presenting itself in Japan to re-anchor inflation expectations to BoJ’s target. However, he cautioned that the process won’t be instantaneous.

            “There’s an opportunity right now,” Gourinchas said, “but it will take time. It won’t happen overnight.” Achieving this re-anchoring requires convincing the public that Japan won’t slide back into deflation – a challenge given the country’s prolonged struggle with price stagnation. Gourinchas believes it’s “too early” for the BoJ to tighten policy, stressing the need for careful handling of the situation.

            Pointing to the global trend of persistent inflation despite initial expectations of transitory dynamics, Gourinchas warned, “Obviously, the history of the last two years is one where inflation that was supposed to be transitory, turned out to be not transitory. We could have similar dynamics in Japan.” Given this possibility, he underscored the need for vigilance and readiness to tighten monetary policy if inflation remains too high.

            Regarding potential strategies for policy tightening, Gourinchas suggested a cautious approach. “It’s probably safer to first move away from the control of long-term yields. And then, if the need arises to tighten monetary policy, it can do so as part of the usual tightening of the policy rate,” he proposed. However, he acknowledged that executing this transition would be technically complex.

            Fed Jefferson: A pause in June doesn’t mean rates have peaked

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              ActionForex.com
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              Comments from top officials from Fed suggested a pause in interest rate hikes in June while possible, shouldn’t be misinterpreted as a sign that peak rates for the cycle have been reached.

              Fed Governor, Philip Jefferson, clarified, “A decision to hold our policy rate constant at a coming meeting should not be interpreted to mean that we have reached the peak rate for this cycle.”

              Jefferson, suggested that skipping a rate hike at an upcoming meeting would provide an opportunity for the committee to review more data before deciding on the extent of any further policy tightening.

              Philadelphia Fed President, Patrick Harker, echoed this sentiment, albeit with a more forceful argument for the need to ‘skip’ rather than ‘pause’. “I am in a camp increasingly coming into this meeting of thinking that we really should skip, not pause,” he remarked.

              Harker believes the current policy is nearing, if not already at, a restrictive level and suggests a period of careful reflection before further action is taken.

              Harker added, “I think we have to be ready that we might have to do more and I’m fully aware we have to do that and willing to do that, but I want to give it a little bit of time.”

              BoE Mann: Inflation gap in the UK more persistent than others

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                ActionForex.com
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                BoE policymaker, Catherine Mann, has highlighted the unique and mounting inflation problem that Britain is facing in comparison to the United States and the Eurozone.

                Mann pointed to both large-scale price increases and the rising persistence of these underlying pressures as causes for concern. She emphasized, “The gap (between headline and core CPI) that I have in my country is more persistent than the gaps that we see in either of my neighbours, the U.S. or the euro area.”

                The gap she refers to is the disparity between headline inflation (which includes volatile commodities like food and energy) and core inflation (which excludes these commodities).

                Notably, Mann underscored the role of British businesses and increased wages in maintaining high core inflation. She explains that businesses in the UK have been successful in passing on price rises, contributing to this persistent inflation gap. This, coupled with increased wages, suggests that headline inflation has been slower to recede towards the core rate than it has in other regions.

                “There is a gap between the headline, which is incorporating energy which went up really high and now has come down, and core where we do start to see the implications coming through pricing channels, through wage negotiations, into something that is persistent,” Mann explained.

                SNB Jordan: We don’t see a big risk in over-tightening monetary policy

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                  ActionForex.com
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                  SNB Chairman Thomas Jordan recently warned yesterday that the more inflation is entrenched in the perception of companies and households, the harder it is to bring it down. He highlighted the urgency of the situation, stating, “We have to bring it back below 2% as soon as possible.”

                  Discussing the bank’s approach towards interest rates, Jordan assured that Switzerland’s are “still very low”. “We don’t see a big risk in over-tightening monetary policy. It is not something that will damage financial stability in general in Switzerland,” he affirmed.

                  Regarding the financial stability issues surrounding Credit Suisse, Jordan clarified that it was an individual case where the problem was not interest rates, but rather a “lack of trust of market participants in an institution.”

                  Looking ahead, market expectations suggest a 25bps rise from the current 1.5% level when the central bank delivers its next assessment in June.

                  Canada GDP flat in Mar, up 0.8% qoq in Q1

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                    ActionForex.com
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                    Canada GDP was flat at 0.0% mom in March, slightly above expectation of -0.1% mom. Services-producing industries was flat while goods-producing industries contracted -0.1% mom. Overall, 12 of 20 industrial sectors posted increases in March.

                    In Q1, GDP grew 0.8% qoq, after posting no change in the previous quarter. That’s the fastest pace since Q2 of 2022. Goods-producing industries edged up 0.1%, partially offsetting the decline observed in the final quarter of 2022. Service-producing industries were up 0.9%, rising for a seventh consecutive quarter. Overall, 16 of 20 sectors recorded gains.

                    Full Canada GDP release here.

                    ECB’s Villeroy foresees declining inflation in France, highlights monetary policy impact”

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                      ActionForex.com
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                      Francois Villeroy de Galhau, a member of ECB Governing Council, has offered an outlook on inflation in France, stating, “We’re very likely there. It’s even likely that we’ve passed the peak and so inflation will come down in France, as we said, between now and the end of the year, even if it won’t be sufficient.”

                      Villeroy shed light on the apparent decrease in what’s known as ‘underlying’ inflation. The ECB official posited, “Part of this can doubtless be attributed to the first effects of monetary policy transmission.” However, he expressed this viewpoint cautiously, adding, “But I say this with caution.”

                      He further stressed the importance of the duration of current interest rates, stating, “I think this morning’s figure is a further sign that, rather than the level of the terminal rate, on which a lot of attention is focused, it’s how long we remain there that is essential.”

                      Villeroy’s commentary arrived following the release of data indicating that the CPI in France dipped from a 6.9% year-on-year increase to 6.0% in May, a figure that came in below the expected 6.4% rise.

                      China’s manufacturing PMI slides to five-month low as economic recovery stumbles

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                        ActionForex.com
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                        China NBS PMI Manufacturing dropped from 49.2 to 48.8 in May, below expectation of 49.4. That’s the lowest level in five months. New orders sub-index followed suit, slipping from 48.8 in April to 48.3 in May, while the new export orders sub-index descended from 47.6 to 47.2.

                        PMI Non-Manufacturing dropped from 56.4 to 54.5, below expectation of 54.9, lowest growth in four months. The official composite PMI, encapsulating both manufacturing and services activity, fell from 54.4 in April to 52.9 in May.

                        “China’s economic-prosperity level has receded, and the foundation for recovery and development still needs to be consolidated,” said NBS senior statistician Zhao Qinghe.

                        Japan industrial production down -0.4% mom in Apr, retail sales disappoint

                          By
                          ActionForex.com
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                          Japan’s industrial production experienced a contraction of -0.4% mom in April, a significantly worse result than expectation of 1.4% mom growth.

                          According to survey by the Ministry of Economy, Trade and Industry, manufacturers are forecasting an output increase of 1.9% in May and 1.2% in June. This rise is expected to be driven by an easing in parts shortages, which should lift production in transportation and production machinery.

                          Despite these projections, a METI official struck a more cautious note, stating, “The current production sentiment is still bearish due to ongoing concerns about the downturn in overseas economies.”

                          Meanwhile, the country’s retail sales also delivered disappointing results. They rose 5.0% yoy, falling short of the anticipated 7.1% yoy increase. On a month-on-month basis, retail sales contracted by -1.2% in April, reversing the 0.3% gain recorded in March.

                          Australia CPI jumped back to 6.8% yoy in Apr, ex-volatile items down to 6.5% yoy

                            By
                            ActionForex.com
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                            Australia monthly CPI jumped from 6.3% yoy to 6.8% yoy in April, well above expectation of 6.4% yoy. Excluding volatile items of automotive fuel, fruit and vegetables and holiday travel, CPI slowed from 6.9% yoy to 6.5% yoy.

                            Michelle Marquardt, ABS head of prices statistics, said: “It’s important to note that a significant contributor to the increase in the annual movement in April was automotive fuel. The halving of the fuel excise tax in April 2022, which was fully unwound in October 2022, is impacting the annual movement for April 2023.”

                            Full Australia monthly CPI release here.

                            New Zealand ANZ business confidence rose to -31.1, RBNZ back at hike by year-end

                              By
                              ActionForex.com
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                              New Zealand’s ANZ Business Confidence Index climbed from -43.8 to -31.1 in May, offering some positive news for the economy. Own Activity outlook also edged higher, moving from -7.6 to -4.5.

                              A more granular look at the data reveals that export intentions went up from -1.5 to 2.0, while investment intentions remained steady at -6.8. However, employment intentions slid from -2.4 to -5.7.

                              Pricing intentions dipped slightly from 53.7 to 52.4, while cost expectations barely shifted, coming down from 84.2 to 84.1. Profit expectations saw a significant uplift, rising from -37.7 to -27.4. Inflation expectations also moderated, falling from 5.70% to 5.47%.

                              ANZ commented on the findings, noting that while RBNZ may view the economy as broadly sluggish, the picture isn’t entirely clear. In their words, “Things are patchy, certainly, but most activity indicators are well off their lows and rising, while cost and price indicators are inching lower, rather than plunging.”

                              In light of these developments, ANZ continues to predict that RBNZ will resume rate hikes by the end of the year, potentially countering the additional stimulus from robust net migration and higher fiscal spending than anticipated. “We continue to expect that the RBNZ will be back at the hiking table by the end of the year.”

                              Full NZ ANZ Business Confidence release here.

                              US consumer confidence fell to 102.3, employment saw most significant deterioration

                                By
                                ActionForex.com
                                -

                                US Conference Board Consumer Confidence dropped from 103.7 to 102.3 in May, but beat expectation of 99.1. Present Situation Index fell from 151.8 to 148.6. Expectations Index dropped slightly from 71.7 to 71.5.

                                Ataman Ozyildirim, Senior Director, Economics at The Conference Board:

                                “Consumer confidence declined in May as consumers’ view of current conditions became somewhat less upbeat while their expectations remained gloomy.”

                                “Their assessment of current employment conditions saw the most significant deterioration, with the proportion of consumers reporting jobs are ‘plentiful’ falling 4 ppts from 47.5 percent in April to 43.5 percent in May.

                                “Consumers also became more downbeat about future business conditions, weighing on the expectations index. However, expectations for jobs and incomes over the next six months held relatively steady. ”

                                “Consumers’ inflation expectations remain elevated, but stable. Consumers in May expected inflation to average 6.1 percent over the next 12 months—essentially unchanged from 6.2 percent in April, though down substantially from the peak of 7.9 percent reached last year.”

                                Full US consumer confidence release here.

                                Eurozone economic sentiment dropped to 96.5, EU down to 95.1

                                  By
                                  ActionForex.com
                                  -

                                  Eurozone Economic Sentiment Indicator fell from 99.0 to 96.5 in May. Employment Expectation Indicator dropped from 107.5 to 104.7. Economic Uncertainty Indicator dropped from 22.2 to 21.8.

                                  Eurozone Industry confidence dropped from -2.8 to -5.2. Services confidence dropped from 9.9 to 7.0. Consumer confidence dropped from -17.5 to -17.4. Retail trade confidence dropped from -0.9 to -5.3. Construction confidence dropped from 0.9 to 0.2.

                                  EU ESI dropped from 97.1 to 95.1. EEI dropped from 106.2 to 104.0. EUI dropped from 21.8 to 21.3. Amongst the largest EU economies, the ESI deteriorated in Spain (-3.0), Germany (-2.9), Italy (-2.3) and the Netherlands (-1.5), whereas it improved in Poland (+1.9) and France (+1.5).

                                  Full Eurozone ESI release here.

                                  Swiss economic outlook worsens as KOF economic barometer plunges

                                    By
                                    ActionForex.com
                                    -

                                    May has brought a significant dip in Swiss KOF Economic Barometer, which fell sharply from 96.1 to 90.2, a figure notably below the anticipated 95.3. This reading, barely above the cyclic trough of 89.3 recorded last November, indicates a continued deteriorating outlook for the Swiss economy for mid-2023.

                                    In a statement, KOF noted, “This is the second time in a row that the barometer has fallen sharply. The outlook for the Swiss economy for the middle of 2023 is thus deteriorating further and remains at a below-average level.”

                                    The sharp decline of the barometer, an important indicator of Switzerland’s economic health, is largely attributed to the manufacturing sector and financial and insurance services. Other economic sectors and foreign demand also contributed negative signals.

                                    In contrast, “indicators covering private consumption are slightly positive,” providing a slight glimmer of optimism amid a broadly dimming economic forecast.

                                    Full Swiss KOF release here.

                                    BoJ Ueda: Will patiently continue monetary easing

                                      By
                                      ActionForex.com
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                                      In today’s parliamentary address, BoJ Kazuo Ueda laid out the central bank’s approach to an evolving inflation scenario in Japan. Governor Ueda announced, “We expect inflation to quite clearly slow below 2%” as we move further into the current fiscal year.

                                      Despite this imminent deceleration, BoJ is forecasting a subsequent rebound, albeit with a degree of caution. Ueda added, “Inflation is likely to rebound thereafter … though there is high uncertainty” about the future direction of inflation rates.

                                      In response to these trends, BoJ plans to remain patient and maintain its current approach to monetary policy. Ueda affirmed the central bank’s commitment to its strategy, stating, “(We) will patiently continue monetary easing as there’s still distance to achievement of sustainable and stable 2% price hikes together with continued rises in wages.”

                                       

                                      ECB De Cos: Closer to end of tightening, prolonged restrictive rates necessary

                                        By
                                        ActionForex.com
                                        -

                                        ECB Governing Council member, Pablo Hernandez de Cos, expressed his thoughts on the direction of ECB’s monetary policy during a speech yesterday.

                                        In his remarks, de Cos stated, “We think that we still have some way to go in tightening monetary policy, although we also think that we are closer to the end.” This suggests a continued commitment to ECB’s policy of monetary tightening, albeit with the recognition that this phase might be nearing its completion.

                                        Furthermore, de Cos underscored the necessity of maintaining restrictive interest rates over a substantial duration. The intention behind this strategy, he explained, is to ensure ECB’s objectives are achieved in a consistent manner over time.

                                        US PCE rose to 4.4% yoy, core PCE up to 4.7% yoy

                                          By
                                          ActionForex.com
                                          -

                                          US personal income rose 0.4% mom or USD 80.1B in April, matched expectations. Personal spending rose 0.8% mom or USD 151.7B, above expectation of 0.4% mom.

                                          For the month, PCE price index rose 0.4% mom. Core PCE price index (excluding food and energy) rose 0.4% mom. Goods prices increased 0.3% mom while services prices increased 0.4% mom. Food prices decreased less than -0.1% mom. Energy prices rose 0.7% mom.

                                          From the same month one year ago, headline PCE price index rose from 4.2% yoy to 4.4% yoy, above expectation of 3.9% yoy. Core PCE price index also ticked up from 4.6% yoy to 4.7% yoy, above expectation of 4.6% yoy. Prices for goods were up 2.1% yoy and prices for services were up 5.5% yoy. Foods prices increased 6.9% yoy. Energy prices decreased -6.3% yoy.

                                          Full US PCE release here.

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