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New Zealand terms of trade dropped -0.7% in Q1 as coronavirus hit

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    ActionForex.com
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    New Zealand terms of trade index dropped -0.7% qoq in Q1, worse than expectation of 1.3% rise. Export volume rose 1.8% qoq while import volumes fell -3.9% qoq. Export prices dropped -0.2% qoq while import prices rose 0.5% qoq. Overall export values for goods rose 3.6% qoq to NZD 15.1B while import values dropped -1.9% qoq to NZD 15.1B.

    “The fall in export prices coincided with the COVID-19 outbreak, which was declared a global pandemic in March 2020,” business prices delivery manager Geoff Wong said. “The COVID-19 outbreak affected demand in export markets and disrupted supply chains, such as sea and air freight.”

    Also released, building permits dropped -6.5% mom in April, comparing with March’s -21.7% mom decline.

    NASDAQ extends rally as Wall Street ignores US unrest

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      The Wall Street continued to ignore the unrest in the US, triggered by police killing of the unarmed black man George Floyd. President Donald Trump expressed his support for “peaceful protesters”. Yet, he also threatened to deploy military to end “riots and lawlessness”. Separately, New York City joined other cities to impose a late-night curfew, from 11pm to 5am.

      Major US indices ended slightly higher, with NASDAQ continuing to outperform DOW and S&P 500. The strong rally form 6631.42 continued overnight to close up 0.66% at 9552.05. Daily MACD’s flattening is a sign of loss of upside momentum. Also, we’re seeing such rise as the second leg of a medium term correction pattern from 9838.37. Hence, while a breach cannot be ruled out, 9838.37 should eventually provide strong enough resistance to bring a near term reversal. But after all, break of 9144.28 support is needed signal short term topping first. Otherwise, the party will go on.

      US ISM manufacturing rose to 43.1, May appears to be a transition month

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        ActionForex.com
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        US ISM Manufacturing Index recovered to 43.1 in May, up from 41.5, beat expectation of 42.5. Looking at some details, new orders rose 4.7 pts to 31.8. Production rose 5.7 pts to 33.2. Employment rose 4.6 points to 32.1. All these components stayed deep in contraction. Though, supplier deliveries improved and dropped -8.0 pts to 68.0.

        Timothy Fiore Chair of ISM Manufacturing Business Survey Committee: “The coronavirus pandemic impacted all manufacturing sectors for the third straight month. May appears to be a transition month, as many panelists and their suppliers returned to work late in the month. However, demand remains uncertain, likely impacting inventories, customer inventories, employment, imports and backlog of orders.”

        Full release here.

        UK PMI manufacturing finalized at 40.7, one of the toughest recovery environments manufacturers have to face

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          ActionForex.com
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          UK PMI Manufacturing was finalized at 40.7 in May, up from record low of 32.6 in April. Output, new orders and employment fell sharply. Input price and output charge inflation remained moderate.

          Rob Dobson, Director at IHS Markit: “Changes to working practices, uncertainty about how long the COVID-19 restrictions may be in place for, weak demand and Brexit worries all suggest the UK is set for a drawn-out economic recovery. This will make the “new normal” one of the toughest recovery environments many manufacturers will ever have to face.”

          Full release here.

          Eurozone PMI manufacturing finalized at 39.4, at least some stabilization, potentially return to growth

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            ActionForex.com
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            Eurozone PMI Manufacturing was finalized at 39.4 in May, up from April’s 33.4. Markit noted that while there was a rebound in the headline PMI, there were sharp falls in new orders and output recorded. Also, job losses mount as manufacturers remained downbeat about outlook. Among the member states, all readings stayed below 50, with Germany at 36.6, Spain at 38.3, Austria at 40.4, France at 40.6, Greece at 41.1, Italy at 45.4.

            Chris Williamson, Chief Business Economist at IHS Markit said: “The manufacturing downturn looks to have bottomed-out in April, with production falling at a markedly slower rate in May. The improvement in part merely reflects the comparison against a shockingly steep fall in April, but more encouragingly was also linked to companies restarting work as virus lockdowns were eased. The further lifting of COVID-19 restrictions in coming months should provide a further boost to manufacturers.

            “While we are still set to see unprecedented falls in industrial production and GDP in the second quarter, the survey brings hope that the goodsproducing sector may at least see some stabilisation – and even potentially a return to growth – in the third quarter. Whether growth can achieve any serious momentum remains highly uncertain, however, as demand – both domestically and in export markets – looks set to remain subdued by social distancing measures, high unemployment and falling corporate profits for some time to come.

            Full release here.

            Australia AiG PMI rose to 41.6, but exports dropped to record low

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              Australian AiG Performance of Manufacturing Index rose to 41.6 in May, up from 35.8. The manufacturing sector still contracted in the month, but at a slow pace. Production improved by 7.1pts to 42.4. Employment rose 6.4 pts to 40.7. New orders rose just 2.4 to 35.1. However, exports index dropped -11.5 pts to 31.1, hitting a new record low.

              AIG noted: Exporters noted that many overseas markets have essentially shut down. They also noted higher prices for air freight into international markets that are still open to them. … Many manufacturers reported that orders from their regular customers have been delayed or cancelled altogether because of the pandemic.”

              Full release here.

              Japan PMI Manufacturing finalized at 38.4, conditions to remain fragile until sustained demand improvement

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                Japan PMI Manufacturing is finalized at 38.4 in May, down from April’s 41.9, lowest since March 2009. Markit said production fell at sharper rate as coronavirus disruption continued. New orders plummeted to an extend not seen since the global financial crisis. Suppliers’ delivery times lengthened sharply once again.

                Joe Hayes, Economist at IHS Markit, said: “While easing lockdown measures will be positive for the economic environment, it is clear that dislocations will remain, which will continue to hinder supply chains, impact global trade and make operating conditions challenging for manufacturers. Until we see a sustained improvement in demand, manufacturing conditions are likely to remain fragile.”

                Full release here.

                Also from released, capital spending rose 4.3% in Q1, versus expectation of -4.2% decline.

                China Caixin PMI manufacturing rose to 50.7, sluggish exports remained a big drag on demand

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                  China’s Caixin PMI Manufacturing rose to 50.7 in May, up from 49.4, back in expansion territory. Markit said that “Supply was generally stronger than demand in the manufacturing sector, as production continued its expansion amid a broader economic rebound while demand had yet to recover.

                  Wang Zhe, Senior Economist at Caixin Insight Group added: “Sluggish exports remained a big drag on demand as the virus continued spreading overseas. Stabilizing the job market is a top priority on policymakers’ agenda this year, as shown in last month’s government work report. Boosting employment is not an easy task, as the employment subindex in the Caixin manufacturing PMI survey has remained in contractionary territory for five months in a row.”

                  Released over the weekend, the official China PMI Manufacturing dropped to 50.6 in May, down from 50.8, missed expectation of 51.1. PMI Non-Manufacturing rose to 53.6, up from 53.2, beat expectation of 53.5.

                  Canada GDP contracted -7.2% in Mar, prelim data points to -11% decline in Apr

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                    ActionForex.com
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                    Canada GDP tumbled a massive -7.2% mom in March, but was better than expectation of -9.0% mom. Overall, 19 of the 20 industrial sectors were down, contributing the monthly decline. StatCan also said that preliminary information indicates a further slump of -11% decline in real GDP in April.

                    IPPI dropped -2.3% mom in April versus expectation of -2.0% mom. RMPI dropped -13.4% mom versus expectation of -23.9% mom.

                     

                    US personal income grew 10.5% in Apr, spending dropped -13.6

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                      ActionForex.com
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                      US personal income grew 10.5% mom, or USD 1.97T in April, versus expectation of -7.0% mom decline. Spending, on the other hand, dropped -13.6% mom, or USD 1.89T, worse than expectation of -12.6% mom. Headline PCE price index slowed to 0.5% yoy, down from 1.3% yoy. Core PCE price index also dropped to 1.0% yoy, down from 1.7% yoy.

                      Full release here.

                      Eurozone CPI slowed to 0.1% yoy, ECB Visco warns of prices-demand downward spiral

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                        ActionForex.com
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                        Eurozone CPI slowed to 0.1% yoy in May, down from 0.3% yoy. That’s also the lowest level in four years. Nevertheless, the slow down was largely driving by -12.0% yoy in energy prices. Excluding energy, CPI was unchanged at 1.4%. CPI ex energy and unprocessed food was unchanged at 1.1% yoy. CPI ex energy, good, alcohol & tobacco was also unchanged at 0.9% yoy.

                        Separately, ECB Governing Council member Ignazio Visco warned, “steps must be taken to counter the significant risk of low inflation and the marked fall in economic activity from translating into a permanent reduction in expected inflation or into the possible resurfacing of the threat of deflation.”

                        “Also as a result of the high levels of public and private debt in the euro area as a whole, this could trigger a dangerous spiral between the fall in prices and that in aggregate demand.”

                        France Q1 GDP revised down to -5.3%, consumer spending dropped -20.2% in Apr

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                          ActionForex.com
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                          According to second estimate, France GDP dropped -5.3% in Q1, revised down from -4.8% in first estimate. Household consumption expenditure recorded an unprecedented drop (-5.6%). Total gross fixed capital formation (GFCF) fell even more sharply (-10.5%). All in all, total domestic demand (excluding changes in inventories) contracted: it contributed -6.0 points to GDP growth.

                          Imports fell (-5.7%), but less sharply than exports which fell by -6.1%. Overall, the contribution of foreign trade balance to GDP growth was zero. Conversely, changes in inventories contributed positively to GDP growth (+0.6 points).

                          Also released, CPI slowed to 0.2% yoy in May, down from 0.4% yoy, missed expectation of 0.3% yoy. Consumer spending dropped -20.2% mom in April, worse than expectation of -15%

                          Swiss KOF dropped to 53.2, manufacturing continues to have strongest negative impact

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                            ActionForex.com
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                            Swiss KOF Economic Barometer dropped to 53.2 in May, down from 59.7, missed expectation of 70.2. The reading has halved now since the beginning of the year. KOF said that as in April, “the manufacturing sector continues to have the strongest negative impact. Indicators relating to foreign demand also have a clearly negative impact on the barometer.” By contrast, “private consumption and the construction industry are sending slightly improved signals.”

                            Full release here.

                            New Zealand consumer confidence improved to 97.3, success in fighting coronavirus

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                              ActionForex.com
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                              New Zealand ANZ Consumer Confidence rebounded by 12pts to 97.3 in May, but remained at “very subdued levels”. Consumers’ perceptions regarding next year’s economic outlook lifted 10 pts -46, still at very low level.

                              ANZ said: “We absolutely should celebrate our success in beating back COVID-19, but the wreckage lies all around us. The loss of jobs in international tourism in particular is a hole that won’t be filled easily or quickly. We see elevated unemployment affecting household sentiment and spending for a long time yet.”

                              The government relaxed the coronavirus restrictions further today, allowing gatherings of up to 100 people. Finance Minister Grant Robertson said New Zealand “now has some of the most relaxed settings in the world. Because of our success in fighting this virus, our public health efforts to go hard and go early have allowed us to open up our economy much quicker than many other countries,” he said.”

                              Japan industrial production plunged -9.1% in April, auto sector particularly severe

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                                ActionForex.com
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                                Japan’s industrial production plunged -9.1% mom in April, even worse than expectation of -5.1% mom. That’s the biggest decline since comparable data became available back in 2013. “Conditions among manufacturers particularly in the auto sector are severe, but production has already restarted in China and I think that they will be resumed in the United States and Europe as well,” said Economy Minister Yasutoshi Nishimura after the release of the data.

                                Also from Japan, unemployment rate edged up by 0.1% to 2.6% in April, better than expectation of 2.7%. Retail sales dropped -13.7% yoy, worse than expectation of -11.5% yoy. Though, Tokyo CPI core turned positive to 0.2% yoy in May, up from -0.1% yoy.

                                Fed Williams: Negative rates don’t make sense given the situation

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                                  ActionForex.com
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                                  New York Fed President John Williams dismissed the idea of negative rates again and said “we have other tools that I think are more effective and more powerful to stimulate the economy”. He added, “I don’t think negative rates is something that makes sense given the situation we’re in because we have these other tools that can be used,” referring to the low interest rates, forward guidance and the balance sheet. Regarding the economy, “over time, the biggest question mark is how the consumer is going to behave,” Williams said. “How long will people take to really want to take advantage of tourism and other things.”

                                  Separately, Dallas Fed President Robert Kaplan said he expected growth in H2 and 2021. His forecasts are based on assumption that consumers would travel, eat out and broadly re-engage in the economy again. But risks are to the downside if the US doesn’t ramp up coronavirus testing. His baseline is that unemployment rate would fall to 10-11% by year-end and dip further to below 7% by end of 2021.

                                  BoE Saunders: Safer to err on the side of easing somewhat too much

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                                    ActionForex.com
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                                    BoE policymaker Michael Saunders, a known dove, warned of the risks of a “vicious circle whereby the economy gets stuck in a self-feeding loop of weak activity, pessimistic expectations and low investment.”

                                    “The searing experience of such a dramatic drop in incomes, jobs and profits is likely to have lasting behavioural effects, as after previous crises,” he said.

                                    He maintained he dovish stance and urged, “it is safer to err on the side of easing somewhat too much, and then if necessary tighten as capacity pressures eventually build, rather than ease too little and find the economy gets stuck in a low inflation rut.”

                                    US Q1 GDP contraction revised down to -5.0% annualized

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                                      ActionForex.com
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                                      According to second estimate, US GDP contracted -5.0% annualized in Q1, worse than first estimate of-4.8% annualized. A downward revision to private inventory investment was partly offset by upward revisions to personal consumption expenditures (PCE) and nonresidential fixed investment. PCE price index was unrevised at 1.3% yoy. PCE core price index was revised down to 1.6% yoy, down from 1.8% yoy.

                                      Full release here.

                                      US durable goods orders dropped -17.2%, ex-transport orders dropped -7.4%

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                                        ActionForex.com
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                                        US durable goods orders dropped -17.2% to USD 170.0B in April, better than expectation of -18.1%. That’s still the second month of sharp decline, following -16.6% in March. Ex-transport orders dropped -7.4%. Ex-defense orders dropped -16.2%.

                                        Full release here.

                                        US initial jobless claims dropped again to 2.1m, continuing claims dropped to 21m

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                                          ActionForex.com
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                                          US initial jobless claims continued to drop, by -323k to 2123k in the week ending May 23. Four-week moving average of initial claims dropped -436k to 2608k. Continuing claims dropped -3860k to 21052k in the week ending May 16. Four-week moving average of continuing claims rose 765.25k to 22722k.

                                          Full release here.

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