Global data missing forecasts; US and China lagging

The global Relative Performance Index (RPI) stands at minus 12 and at minus 21 less prices (RPI-P), the latter indicating that firmer-than-expected inflation reports are lifting the overall score.

The US score, sagging since April’s lower-than-expected employment report, had been on the rebound but was set back in the latest week by the downgrade for first-quarter GDP. At minus 20 overall and minus 21 less prices, the RPIs could sink further yet should the coming week’s May employment report also disappoint, a result that would reawaken rate-cut expectations.

For Canada where the both the RPI and RPI-P are near zero at plus 1, economic surprises won’t be a factor at the Bank of Canada’s June 5 policy meeting. The consensus for the meeting is split between no action and a rate cut, setting up what may be financial-market fireworks either way after Wednesday’s announcement.

In the Eurozone, surprisingly strong inflation in the key May report is unlikely to prevent the ECB easing this week but will dampen speculation about another in July . More generally, at 14 the region’s RPI shows overall economic activity running a little ahead of forecasts but, with the RPI-P at 3, recent real economy developments have largely conformed to expectations.

In the UK, second-tier economic news was typically a little firmer than anticipated but not sufficiently so as to lift either the RPI (minus 9) or RPI-P (minus 31) back above zero. The economy has recently picked up momentum and a cut in Bank Rate at the June 20 BoE meeting is probably off the table, but activity in general is still lagging market forecasts.

In Switzerland, surprisingly robust first quarter GDP growth helped to the keep the RPI (9) in positive surprise territory. The RPI-P (2) also finally climbed above zero for the first time since mid-March, albeit only just. However, both gauges show recent economic activity in general largely meeting expectations and financial markets are still unsure about the outcome of this month’s SNB Monetary Policy Assessment (MPA).

In Japan, another mixed bag of data left the RPI (3) and RPI-P (minus 1) little changed on the week. Both measures still show economic activity essentially matching the consensus call, offering limited guidance to investors who remain uncertain about the timing of the next BoJ tightening. Still, with the yen so weak, action at the June 13 meeting is at least a possibility.

In China, early warning from the CFLP of a disappointingly soft economy in May pushed the RPI (minus 36) and RPI-P (minus 50) deeper into negative surprise territory. The IMF has just upgraded its forecast for Chinse growth but most investors have yet to be convinced that fiscal policy is loose enough.