Germany PMI manufacturing finalized at 54.6, unwanted combination of soaring price pressures and falling activity

    Germany PMI Manufacturing was finalized at 54.6 in April, a 20-month low, down from March’s 56.9. S&P Global said supply disruption and weaker demand weighed on output. Soaring costs drove unprecedented rise in prices charged. Goods producers remained pessimistic about the outlook.

    Phil Smith, Economics Associate Director at S&P Global, said:

    “Germany’s manufacturers are facing an unwanted combination of soaring price pressures and falling activity, as the war in Ukraine and COVID lockdowns in China disrupt supply chains and hit demand.

    “The survey’s output index is now in contraction territory for the first time since the initial COVID shutdowns in the first half of 2020, with a similar situation for new orders hinting that this not just a supply problem but also evidence of slowing demand for goods.

    “While factory employment continues to rise, and at a robust pace, it would seem that it’s only a matter of time before the weakened trends in output and new orders start to feed through to hiring activity, especially given manufacturers’ gloomy assessment of the outlook.

    “It’s early days yet, but it’s already looking like manufacturing will be a drag on the economy in the second quarter, and the prospect of more lockdowns in China and any escalation of the energy crisis would only serve to increase this risk.”

    Full release here.

    France PMI manufacturing finalized at 55.7 in Apr, continues to churn out growth

      France PMI Manufacturing was finalized at 55.7 in April, up from March’s 54.7. S&P Global said manufacturing output growth was constrained by war in Ukraine. There were reports of automotive sector weakness, while supply issues persisted. Output price inflation accelerated to series high.

      Joe Hayes, Senior Economist at S&P Global, said:

      “France’s manufacturing sector continues to churn out growth in the face of an intensely challenging backdrop for goods producers. That said, some of the anecdotal evidence from panellists we received this month suggests production growth may be short-lived.

      “Advanced purchases from clients in anticipation of price hikes underpinned order book growth at some firms. This is worrying evidence that suggests inflation expectations have become de-anchored, but it also suggests that weaker demand conditions are in the horizon if clients are bringing forward their purchases and are hesitant to place orders at higher prices.

      “The supply situation also remains uncertain as bottlenecks in China due to COVID restrictions and the war in Ukraine have added to pressures. Firms continue to struggle to replenish their stock of finished goods, which have fallen in for the past six months.

      “If firms can secure inputs, this may help support output in the face of weak demand if firms choose to rebuild their stocks, but rampant inflation and a concerning outlook for demand is diminishing support for growth.”

      Full release here.

      Swiss SECO consumer climate dropped to -27 in Q2, marked weakening of sentiment

        Swiss SECO consumer climate dropped sharply from -4 to -27 in Q2, well below expectation of -15. That’s was the biggest decline since the onset of the pandemic, and the reading was below long-term average of -5. Looking at some details, the expected economic development index dropped from 21 to -31. Expected financial situation dropped from -3 to -25. Major purchases index dropped further from -23 to -31.

        SECO said: “The survey from April shows a marked weakening of consumer sentiment. In particular, consumers’ outlook for the general economic situation has turned far more pessimistic. Households are feeling the strain as prices continue to rise. Meanwhile, the situation on the labour market is again being viewed as more positive. ”

        Full release here.

        Japan consumer confidence ticked up to 33.0 in Apr

          Japan consumer confidence index rose slightly by 0.2 pts to 33.0 in April, missed expectation of 33.9. Overall livelihood dropped -0.1 to 31.2. Income growth dropped -0.6 to 36.8. Employment rose 1.3 to 36.1. Willingness to buy durable goods dropped -0.1 to 27.7.

          93.7% of respondents expect prices to go up a year ahead, up 0.9%. 2.7% expect prices to stay the same, down -0.8%. 2.1% expect prices to go down, up 0.1%.

          Full release here.

          NZD/USD extends down trend, pressing MT channel support

            NZD/USD’s decline resumes today and hit as low as 0.6420 so far. The weakness in Kiwi is mainly due to external factors, rather than domestic ones. The economy remains strong while RBNZ is expected to continue with its tightening cycle. But the pace of rate hike would likely be outpaced by Fed’s. Additionally, concerns over China’s slowdown on lockdowns, and general risk-off sentiment are weighing on New Zealand Dollar too.

            Immediate focus is now on medium term channel support (now at 0.6430). Sustained break there could prompt further downside acceleration to 61.8% projection of 0.5467 (2020 low) to 0.7463 (2021 high) at 0.6229. Nevertheless, break of 0.6543 minor resistance would be an initial sign of stabilization, and turn bias to the upside for rebound first.

            Japan PMI manufacturing finalized at 53.5, war and China weigh on confidence

              Japan PMI Manufacturing was finalized at 53.5 in April, down from March’s 54.1. Au Jibun Bank said growth in output levels was unchanged as new orders expansion slowed. Factory gate charges were in record rise amid accelerating input prices. Business optimism dipped to lowest since July 2020.

              Usamah Bhatti, Economist at S&P Global, said: “Domestic demand was a key driver of growth… but the reintroduction of lockdown restrictions in China hindered international demand. These measures coupled with the fallout from war in Ukraine continued to disrupt supply chains across the sector.

              “Delivery delays and price rises remained a dampener… Sharply rising cost burdens pushed Japanese manufacturers to raise selling prices to the greatest extent in the survey history.

              “Though still optimistic, Japanese goods producers were increasingly wary of the continued impact of price and supply pressures, and also the impact of the war and extended lockdowns in China. As a result, confidence dipped to the weakest since July 2020.”

              Full release here.

              ECB de Guindos: July rate hike is possible but not likely

                In an interview published on Sunday, ECB Vice President Luis de Guindos reiterated that ECB decided to end asset purchases in Q3. “In my opinion, there’s no reason why this shouldn’t happen in July,” he said.

                As for rate hike, “it could be months, weeks or days” after ending the asset purchases. “July is possible, but that’s not to say it’s likely,” he added.

                After the first hike, “we are driven by data, not by markets. Markets can sometimes be wrong. Within the Governing Council we haven’t discussed any predetermined path for rate rises.”

                Full interview here.

                ECB Lane: Scale and timing of interest normalization are data-dependent

                  ECB Chief Economist Philip Lane said in a Bloomberg TV interview, “the story is not the issue about are we going to move away from -0.5% for the deposit rate. The big issue which we do need to still be data-dependent about is the scale and the timing of interest-rate normalization.”

                  “In the near-term, yes, inflation is very high and that does carry its own risk of momentum,” Lane admitted. “On the other hand the high energy prices are eating into disposable incomes, it’s reducing consumption and the war has a scope – especially depending on how it goes – in terms of mapping into lower investment, lower consumption, confidence effects and extra pressure on energy.”

                  US PCE price index rose to 6.6% yoy, but core PCE ticked down to 5.2% yoy

                    US personal income rose 0.5% mom or USD 107.2B in March, slightly above expectation of 0.4% mom. Spending rose 1.1% mom or USD 185.0B, above expectation of 0.6% mom.

                    Headline PCE price index accelerated from 6.3% yoy to 6.6% yoy, above expectation of 6.5% yoy. Excluding good and energy, PCE core price index ticked down from 5.3% yoy to 5.2% yoy, below expectation of 5.3% yoy. Energy prices increased 33.9% yoy while food prices rose 9.2% yoy.

                    Full release here.

                    Canada GDP grew 1.1% mom in Feb, to grow further in Mar

                      Canada GDP grew strongly by 1.1% mom in February, above expectation of 0.8% mom. That’s the fastest monthly growth since March 2021, and the ninth consecutive monthly expansion. Services-producing industries grew 0.9% while goods-producing industries grew 1.5%. 16- of industrial sectors expanded. Advance information indicates that GDP increased 0.5% mom in March.

                      Full release here.

                      Eurozone CPI ticked up to 7.5% yoy in Apr, core CPI rose to 3.5% yoy

                        Eurozone CPI ticked up from 7.4% yoy to 7.5% yoy in April, matched expectations. CPI core rose from 2.9% yoy to 3.5% yoy, above expectation of 3.1% yoy. Looking at the main components of euro area inflation, energy is expected to have the highest annual rate in April (38.0%, compared with 44.4% in March), followed by food, alcohol & tobacco (6.4%, compared with 5.0% in March), non-energy industrial goods (3.8%, compared with 3.4% in March) and services (3.3%, compared with 2.7% in March).

                        Full release here.

                        Eurozone GDP grew 0.2% qoq in Q1, EU up 0.4% qoq

                          Eurozone GDP grew 0.2% qoq in Q1, slightly below expectation of 0.3% qoq. Comparing with the same quarter a year ago, Eurozone GDP grew 5.0% yoy.

                          EU GDP grew 0.4% qoq, 5.2% yoy. Among the Member States for which data are available for the first quarter 2022, Portugal (+2.6%) recorded the highest increase compared to the previous quarter, followed by Austria (+2.5%) and Latvia (+2.1%). Declines were recorded in Sweden (-0.4%) and in Italy (-0.2%). The year on year growth rates were positive for all countries.

                          Full release here.

                          SNB Jordan: Swiss can withstand franc being stronger in nominal terms

                            SNB Chairman Thomas Jordan said two reasons have spoken against a rise in interest rate in reaction to inflation. “First, inflationary pressure is moderate here in Switzerland. Second, inflation is likely to return to the range compatible with price stability in the foreseeable future,” he said.

                            SNB forecasts inflation to average 2.1% this year before declining in 2023 and 2024. “The monetary conditions are therefore appropriate at present,” Jordan said. “However, should there be signs of a strengthening and spread in inflationary pressure, we will not hesitate to take the necessary measures.”

                            On Swiss Franc exchange rate, he said, it there had been “hardly any change in the real exchange rate” over the past few quarters. “We do not react mechanically to every instance of upward pressure,” he added. “If you have followed the Swiss franc closely over the past months, you will know that it has gradually appreciated and has at times even fallen below parity to the euro.”

                            Also, SNB had “quite deliberately” allowed appreciation of the Franc. “This means that our economy can withstand the franc being stronger in nominal terms,” Jordan said. “The higher prices abroad and the nominally stronger Swiss franc roughly balance one another out.”

                            Germany GDP grew 0.2% qoq in Q1, Ukraine war weighs on short-term development

                              Germany GDP grew 0.2% qoq in Q1, matched expectations. On the same quarter a year earlier, GDP grew 3.7% yoy. The growth was mainly due to higher capital formation, whereas the balance of exports and imports had a downward effect on economic growth. The economic consequences of the war in Ukraine have had a growing impact on the short-term economic development since late February.

                              Full release here.

                              Swiss KOF economic barometer rose to 101.7, contrast between corona easing and war

                                Swiss KOF Economic Barometer improved from 99.7 to 101.7 in April, above expectation of 99.3. It’s back above long-term average of 100 after dipping below that level in March. Outlook for the Swiss economy is therefore rather favorable in the short term.

                                KOF said, accommodation and food service activities and the other services sector are responsible for the rise. On the other hand, indicators for foreign demand are currently the strongest drag.

                                It added, “this contrast highlights the tension between Corona easing and international burdens, especially the Ukraine war.”

                                Full release here.

                                Also from Swiss, retail sales dropped -6.6% yoy in March, below expectation of 13.3% yoy rise.

                                France GDP stagnated in Q1 with sharp decline in household consumption

                                  France GDP stagnated with 0.0% qoq growth in Q1, below expectation of 0.3% qoq. Households’ consumption expenditure sharply decreased (-1.3% after +0.6%) while gross fixed capital formation (GFCF) slightly decelerated (+0.2% after +0.3%). Finally, internal demand excluding inventory changes contributed to -0.6 points to GDP growth, after +0.5 points in the previous quarter.

                                  Full GDP release here.

                                  Also from France, consumer spending dropped -1.3% mom in March, worse than expectation of -0.1% mom. CPI accelerated from 5.1% yoy to 5.4% yoy in April, above expectation of 5.1% yoy.

                                  US initial jobless claims dropped to 180k, continuing claims down to 1.408m

                                    US initial jobless claims dropped -5k to 180k in the week ending April 23, slightly above expectation of 178k. Four-week moving average of initial claims rose 2k to 180k.

                                    Continuing claims dropped -1k to 1408k in the week ending April 16. That’s the lowest level since February 7, 1970, when it was 1397k. Four-week moving average of continuing claims dropped -24.5k to 1455k, lowest since March 14, 1970 when it was 1435k.

                                    Full release here.

                                    US GDP dropped -1.4% annualized in Q1, first contraction since Q2 2020

                                      US GDP unexpectedly contracted -1.4% annualized in Q1, much worse than expectation of 1.1% growth. That’s also the first contraction reading since Q2 2020.

                                      The decrease in real GDP reflected decreases in private inventory investment, exports, federal government spending, and state and local government spending, while imports, which are a subtraction in the calculation of GDP, increased. Personal consumption expenditures (PCE), nonresidential fixed investment, and residential fixed investment increased.

                                      Full release here.

                                      Yuan extends down trend, USD/CNH pressing important resistance

                                        Offshore Chinese Yuan’s decline resumes today with USD/CNH hitting as high as 6.637 so far. Earlier this week, PBoC announced to cut the foreign exchange reserve ratio by 100bps from 9% to 8%. That was aimed providing liquidity to stabilize exchange rate. But so far the impact was very brief.

                                        Capital was seen flowing out of China in accelerated manner since march, due to divergence in policies with other major central bank. Russia invasion of Ukraine, and the risk of tough spread of tough Shanghai like lockdowns added additional uncertainty.

                                        Nevertheless, technically, USD/CNH is now at an important resistance of 38.2% retracement of 7.1961 (2020 high) to 6.3057 (2022 low) at 6.6458. Strong resistance could be seen at the current level to cap upside. Break of 6.544 support would indicate short term topping. However, sustained break of 6.6458 would be a significant development, which could push USD/CNH further to 61.8% retracement at 6.8560.

                                        ECB de Guindos: Russia invasion casts a dark shadow over Europe

                                          In remarks to a Committee of the European Parliament, ECB Vice President Luis de Guindos said, Russian invasion of Ukraine has “cast a dark shadow over” Europe, as a human tragedy and affecting the economy. Economic activity is expected to continue to growth this year, “albeit at a slower pace than was expected “. The war has “amplified the impact on consumer energy prices”.

                                          The surge in energy prices is “reducing demand and raising production costs” while the war is “weighing heavily on business and consumer confidence and has created new bottlenecks.” These developments point to slower growth in the period ahead.

                                          Prices increased will “most likely remain high over the coming months”. Medium term inflation expectations indicates inflation ares around the 2% target. But, ” inflation expectations have been rising in recent months though and initial signs of above-target revisions in those measures warrant close monitoring.”

                                          He reiterated that the APP will be concluded in Q3 and changes to interest rates will follow “some time after” the end of the net purchases, and will be “gradual”.

                                          Full remarks here.