Global data beating forecasts; RPI at 16 and RPI-P at 21

Global data are continuing to exceed forecasts ending last week at 16 on the Relative Performance Index (RPI) and rising a bit further to 21 when excluding price data (RPI-P) to indicate tangibly greater-than-expected strength in real activity. These results are only slightly less favorable than the prior week’s respective RPI and RPI-P scores of 23 and 26.

First quarter data from the Eurozone continue to surprise mainly on the upside but not by much. At 3, the latest readings on both the RPI and RPI-P show overall economic activity currently performing much as expected. And this should be more than enough to underpin speculation that the European Central Bank will be cutting key interest rates soon.

In the UK, the latest real economy news on average has contained no major shocks. Indeed, the RPI-P ended last week at exactly zero. Still, with the RPI currently at minus 12, inflation developments remain on the soft side of forecasts which should mean that a reduction in Bank Rate is still just a matter of time.

A similar picture is true of Switzerland where, at minus 4, the RPI stayed close to zero and, at minus 10, the RPI-P shows just a very limited degree of underperformance. Without some upside surprises on inflation, the Swiss National Bank’s policy rate could well be lowered again at June’s Monetary Policy Assessment.

In Japan, a mixed week for economic data left both the RPI (minus 18) and RPI-P (minus 20) in negative surprise territory, extending the clear bias towards downside surprises seen since the start of the year. Against this backdrop, prospective Bank of Japan tightening is unlikely to be aggressive.

In Canada, the real economy began 2024 on a surprisingly strong note and lifted the RPI-P to 43, its highest value since June 2023. Even so, with the RPI fully 20 points lower at 23, the implications are that inflation continues to undershoot expectations so the door to a Bank of Canada rate cut remains open.

US data maintained an upside bias but just barely, slowing from 31 the prior week for both the RPI and RPI-P to 5 and 6 respectively in the latest week. Nevertheless first quarter growth is shaping up well, justifying the Federal Reserve’s decision to leave policy on hold earlier this month.