Global data hitting forecasts; Europe leads, North America lags

Global economic data continue to come in very near expectations, at minus 3 for the Relative Performance Index and at plus 3 less prices (RPI-P). Though the outlook for monetary policy varies by region, on net the results point to a steady period for global interest rates.

Overall economic activity in Eurozone had underperformed for almost all of April but May’s early releases have proved surprisingly strong. At 21 and 41 respectively, both the RPI and, in particular, RPI-P, show the latest data quite easily beating market forecasts. ECB policy remains on course for a June ease but beyond that, the path to lower interest rates is much less clear.

Confirmation that the UK recession ended last quarter was provided by a surprisingly large increase in total output. The unexpected strength of the March data boosted the RPI to a solid 41 and the RPI-P to fully 52, the latter’s highest reading since last August. The BoE MPC may be moving towards a cut in Bank Rate but these values suggest that the pressure to ease is not as intense as previously supposed.

A weaker labour market in Switzerland last month carried no surprise but left economic activity in general still disappointingly soft. The RPI closed out the week at minus 10 and the RPI-P at minus 28, leaving the door still open for another 25 basis point ease in the SNB’s policy rate in June.

In Japan, the RPI’s move into positive surprise territory proved only brief as the gauge ended the week at minus 19. Still, weakness here only reflects unexpectedly soft prices as, at 4, the RPI-P held just above zero.

China ended the week exactly at zero for the both the RPI and RPI-P indicating that the countries, on net, are hitting Econoday’s consensus estimates on the nose and suggest that pressure on authorities to stimulate the economy may be easing.

Canada remains in negative ground though April’s strong employment report helped lift the RPI by more than 20 points to, however, a still sizably negative minus 31. Wage growth is a concern for the Bank of Canada but a cut in interest rates next month is still a possibility.

Both the RPI and RPI-P are at minus 26 to extend a building run of underperformance for the US economy. Yet with inflation and inflation expectations not showing improvement, it would take greater underperformance to prompt Federal Reserve officials to talk up rate cuts.