Stressful Day that Includes the Biden-Putin Talks in Geneva, an FOMC Policy Meeting in Washington, and an Assortment of Meaningful Data Releases

June 16, 2021

The Biden-Putin summit is underway and expected to last around five hours. The U.S. political leaders will then hold separate individual press conferences rather than a joint event.

The Federal Open Market Committee is not expected to change monetary policy settings but could for the first time indicate that it’s not too early to begin thinking about how policy stimulus will be reduced in the future. Macroeconomic and interest rate forecasts will be updated, which is done quarterly, and Chairman Powell’s press conference will start at 18:30 GMT.

Chinese May retail sales, industrial production, unemployment and fixed asset investment figures were released.

  • On-year retail sales growth decelerated a bit more than expected to 12.4% from 17.7% in April and 33.9% in 1Q. Sales in 2020 averaged 4.8% less than in 2019.
  • On-year growth in industrial production of 8.8% also was a tad under analyst forecast and compares with growth of 9.8% in April and 24.5% in the first quarter.
  • The jobless rate declined to a 2-year low of 5.0% from 5.1% in April and this year’s high of 5.5% in February.
  • Fixed asset investment in January-May was 15.4% greater than in the first five months of 2020. FAI last year only rose 2.9% on average.

Japanese core domestic machinery orders grew only a quarter as fast in April as had been anticipated. Such rose 0.6% after dropping 5.3% on average during the first quarter. Government orders for machinery orders declined 2.7%, but a 46.2% surge in orders from abroad far outweighed the domestic disappointments, and total machinery orders increased by 18.2% in the latest month.

Japan’s trade balance swung into the red in May, however. There was a JPY 187 billion customs clearance trade deficit last month that translated into a seasonally adjusted 43 billion yen surplus, down from surpluses of 84 billion yen in April and JPY 355 billion per month during the first quarter.

British CPI inflation accelerated to an above-target and 22-month high of 2.1% in May from 1.5% in April and 0.7% in March. Core CPI of 2.0% was up from 1.3% in April.

British producer output price inflation of 4.6% last month was its highest in 112 months and up from 0.1% in January. Energy costs rose 3.3% on month and 67% on year. Producer input price inflation has accelerated from -0.3% in December to +10.7% in May.

Russian President Putin may take pride in Russian software hacking proficiency, but the rest of the Russian economy isn’t doing well under his leadership. Between the first quarter of 2020 and first quarter of 2021, Russian real GDP contracted 0.7%, whereas U.S. real GDP expanded 6.4%.

Hourly labor costs in the euro area slowed to a year-on-year increase of 1.5% in the first quarter. That pace of rise was down from 3.6% in the first quarter of 2020 and the lowest in 17 quarters. This development also supports the contention of officials that this year’s spike in price inflation will be transitive.

Czech producer price inflation of 5.1% last month was the highest since late 2011, and Polish CPI inflation of 4.7% was the most since the pre-pandemic month of February 2020.

New Zealand experienced a NZD 2.895 billion current account deficit last quarter and a net deficit of NZD 7.24 billion, equivalent to 2.2% of GDP, over the past four quarters.

Australia’s Westpac-compiled index of leading economic indicators dipped 0.1% in May, its first drop since January.

Canadian CPI inflation accelerated 0.2 percentage points to a 10-year high of 3.6% in May. Back in December, inflation was only 0.4% there.

U.S. import prices increased 1.1% on month in May, lifting the 12-month rate of increase to a 116-month high of 11.3%. By contrast, import prices had declined 6.3% in the previous twelve months through May 2020. Imported fuel in the latest one-year period went up 109.6% after dropping by 52.3% in the prior year through May 2020. All other import prices collectively climbed 6.0% on year versus a 0.7% drop in the prior 12 months.

U.S. housing starts rose 3.6% to a 2-month high in May and were 50.3% above the level in May 2020. Building permits, however, fell 3.0% on month.

The Bank of Uganda cut its key interest rate for the first time in a year, reducing such by half a percentage point to 6.5%. Ugandan CPI inflation has dropped under both the central bank’s medium term target and is even hovering just under 2%. Officials had implemented a pair of 100-basis point cuts in April and June of 2020.

The dollar is little changed from Tuesday closing levels. 10-year U.S., German, and British sovereign debt yields are a basis point softer. European stock exchanges and U.S. stock futures show little change, but share prices fell by 1.1% in China, Singapore and New Zealand, 0.7% in Hong Kong, 0.6% in South Korea and 0.5% in Japan.

Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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