Big Data Release Day Including Inflation Measures for the U.S., Euroland and Tokyo
May 31, 2024
Just minutes before the release of the U.S. personal consumption expenditures price deflator, the dollar showed overnight losses of 0.3% against the Canadian and Aussie currencies and 0.2% versus the euro and peso but had also risen 0.2% against the yen and 0.1% versus the Swiss franc and sterling.
Ten-year German, French, Italian and Spanish sovereign debt yields were four basis points higher, and the British gilt and U.S. Treasury yields had firmed two and one basis points.
Japan’s Nikkei closed Friday up 1.1%, but stock markets in China, Hong Kong and Taiwan had lost 0.2%, 0.8% and 0.9% on the final day of this week. The German Dax, Paris CAC and futures indication of the DJIA each were down 0.1%. Gold and oil were also 0.1% softer, and Bitcoin was steady.
The U.S. personal consumption expenditure price deflator went up 0.3% for a third straight month in April and recorded an unchanged and as-expected 2.7% 12-month rate of increase. The core PCE deflator (excluding food and energy) rose 0.2%, its smallest monthly rise so far of 2024 and marginally less than analysts were anticipating but not enough so to shrink the year-on-year comparison of 2.8% for a third straight month. That’s still well above the Fed’s target of 2.0%. April’s monthly rises in personal income (0.3%), disposable income (0.2%) and personal consumption expenditures (also 0.2%) were each smaller than gains in March. The U.S. savings rate of 3.6% matched March’s ratio but was down from 4.1% in January.
Consumer price inflation in the euro area accelerated more than expected to a 3-month high of 2.6% in May from 2.4% in both March and April. Core inflation also rose 0.2 percentage points to a 2-month high of 2.9%. Service sector prices provided the main upside impulse, printing at a 4.1% year-on-year pace versus 3.7% in April. Although analysts still believe that an initial interest rate cut will be engineered by the European Central Bank Governing Council in June, today’s data elicited a scaling back of the monetary easing during the second half of 2024 that is being priced into the marketplace.
Core consumer price inflation in Tokyo, which includes energy but not perishable food, accelerated to a 2-month high of 1.9% in May to 1.9%. Excluding energy as well, consumer price inflation jumped 0.4 percentage points to 2.2%. Investors will not learn May inflation for all of Japan, but Tokyo tends to be a good leading indicator of the national trend. This report supports the rising concern of Bank of Japan officials that the weak yen has inflationary implications.
Japan also reported unemployment, retail sales, industrial production, housing starts and construction orders on this final day of May. The jobless rate printed at 2.6% for a third straight month in April, but the job offers/seekers ratio fell back to a 21-month low of 1.26 that had occurred initially in February. A 0.1% dip in industrial production during April was a full percentage point less than forecast but associated with a smaller 1.0% year-on-year slide after that of 4.0% during 1Q 2024. Retail sales climbed 1.2% on month, reversing the drop experienced in the prior month and widening the 12-month increase to 2.4%. A 13.9% on-year leap in housing starts was the largest advance in 106 months, and construction orders climbed 26.4% from a year earlier after an even bigger 31.4% 12-month increase in March.
The Chinese government authority NBS released monthly composite, manufacturing and non-manufacturing purchasing manager survey results for May. The composite and manufacturing indices of 51.0 and 49.5 represent 3-month lows, and non-manufacturing ticked 0.1 point lower to 51.1, its weakest reading since January.
Retail sales in Hong Kong slumped by a sharp 6.0% on month and 16.5% on year in April.
South Korean industrial production in April was 6.1% greater than a year earlier, but retail sales posted a 2.7% decline over the same span.
First-quarter French GDP growth (+0.2% from 4Q and 1.1% from a year earlier) were left unrevised from the preliminary estimate. Likewise Italian GDP growth of 0.3% last quarter matched the initial quarterly estimate, but year-on-year growth was revised upward to 0.7% from 0.6% reported earlier.
Quarterly and year-on-year GDP growth in Portugal got revised up 0.1 percentage point to 0.8% and 1.5%, respectively. Serbian GDP climbed 0.8% last quarter, resulting in the largest on-year advance (4.7%) in nine quarters. Latvian GDP went up 0.9% last quarter but was only 1.0% above its year-earlier level. Turkish GDP in the first quarter posted robust gains of 2.4% from 4Q 2023 and 5.7% from 1Q 2023. The year-on-year pace surpassed 4.5% in full-2023 and was similar to growth of 5.6% in 2022.
German retail sales in April contracted 1.2%, considerably more than the dip analysts had been anticipating, and that kept their year-on-year comparison in the red (-0.6%). However, Swiss retail sales rose 0.2% on month and by the most from a year earlier (+2.7%) since Russia invaded Ukraine.
Other price data reported today showed the following:
- German import prices rose 0.7% on month in April. Their on-year decrease was only 1.7%, half as much as the decline of 3.6% on March and well below the -12.9% nadir last August.
- Belgian producer price deflation narrowed sharply to -2.7% in April from -8.8% in March and -14.2% experienced during the year to October 2023.
- French consumer prices were unchanged this month and matched April’s 2.2% 12-month rate of increase.
- Italian consumer price inflation, which had dropped from 11.8% in October 2022 to 0.8% in April, remained at 0.8% in May.
- Portuguese CPI inflation jumped 0.9 percentage points to 3.1% in May from 2.2% in April and 1.4% at the end of 2023.
- Dutch CPI inflation remained steady in May at April’s 2.7% but 1.2% experienced last December.
- The 12-month change in the British Nationwide house price index doubled to +1.3% in May from 0.6% in April but was below March’s 1.6% and well below 14.3% hit in March 2022.
Monetary officials at the South Africa Reserve Bank left their repo rate unchanged at 8.25% after this week’s scheduled policy review. This decision to retain the rate level first reached in May 2023 had been expected. From a pandemic low of 3.50% from July 2020 until a 25-basis point increase in November 2021, the rate had been increased by a further 325 bps during 2023 and 125 bps in the first half of 2023. CPI inflation meanwhile receded from 7.8% in July 2022 to 4.7% one year later and 5.1% by the end of 2023, but at 5.2% last month had moved no closer to the 4.5% target. Officials now anticipate the target to be achieved around a year from now.
The National Bank of Kazakhstan’s policy interest rate was cut today by 25 basis points to 14.5%, its lowest level in 20 months. The rate previously had been sliced by 100 basis points in the first quarter of this year and 100 bps last year. The peak of 15.75% from October 2022 until August 2023 contrasted with a pandemic low of 9.0% from July 2020 until July 2021. CPI inflation in Kazakhstan has receded from 21.3% in February 2023 to a 26-month low of 8.7% in April of this year.
The Chicago regional purchasing managers index for manufacturers had been projected to rise a bit but instead dropped 2.5 points to a 4-year low of 35.4 in May.
In the Bizarro World of American politics, former U.S. President Trump’s 34-count felony conviction by a jury of his peers announced late yesterday afternoon is deemed just as likely to improve his presidential campaign poll ratings as to hurt such.
Canadian real GDP grew at a 1.7% annualized rate between 4Q 2023 and 1Q 2024, beating the U.S. pace of 1.3% announced yesterday. However, growth momentum slowed over the course of the period. Measured from the supply side, GDP increased 0.5% in January and 0.2% in February before stagnating in March. Similarly, industrial production sandwiched monthly declines of 0.3% in January and 0.5% in March around February’s zero percent change. Between March 2023 and March 2024, GDP rose 0.6%, but industrial production dropped 1.6%.
Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Euroland CPI, German retail sales and import prices, National Bank of Kazakhstan, South Africa Reserve Bank, Tokyo CPI, U.S. PCE price deflator
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