Global data soft within consensus ranges; US weak

Econoday’s Relative Performance Index (RPI) for global indicators ended last week at minus 5 and at minus 7 less inflation (RPI-P). These readings are close to the zero line to indicate that, on net, data are coming in near enough to the consensus estimates but toward the lower end of consensus ranges.

The much softer-than-expected payrolls report, together with recent weakness in many factory reports, pulled the US into decidedly negative territory, at minus 31 for the RPI and minus 30 for the RPI-P. These scores are some of the lowest of the year and posted against already moderating forecasts; if extended in the coming weeks, such underperformance would build increasing pressure on the Federal Reserve, presidential election or not, to finally cut rates at their September 17-18 meeting.

Muted albeit slightly stronger-than-expected GDP growth in Canada was not been enough to lift the either the RPI (minus 16) or RPI-P (minus 4) back above zero. In the main, economic activity continues to disappoint leaving speculators contemplating what would be a third consecutive Bank of Canada rate cut next month.

In the Eurozone, an RPI of 11 shows recent overall economic activity running just marginally ahead of market forecasts. However, with the RPI-P at minus 3, upside surprises remain restricted to prices making another ECB ease in September far from guaranteed.

In the UK, the recent bias towards economic underperformance extended into another week, leaving both the RPI (minus 16) and RPI-P (minus 23) closing out the week quite well below zero. Underlying inflation may still be worryingly high but the disappointingly soft performance by the real economy helps to justify last week’s split decision by the Bank of England to cut Bank Rate by 25 basis points.

In Switzerland, economic news similarly continues to surprise on the downside. At minus 23 and minus 19, current readings on the RPI and RPI-P will do nothing to undermine speculation that the Swiss National Bank will be cutting interest rates again next month.

The Bank of Japan’s rate hike came a little ahead of most market calls. However, with the RPI (24) and, in particular, the RPI-P (53) showing economic activity running well ahead of forecasts, the move should not have been a major surprise.

In China, both the RPI and RPI-P finished the week at exactly zero. However, even if overall economic activity is now matching market forecasts, those expectations were only soft to start with. For investors, the speed of recovery remains worryingly sluggish.