Global activity still lagging, RPI at minus 17

Global economic activity continues to struggle to keep up with market expectations. At minus 17, the RPI shows forecasters on average not too wide of the mark but underperformance can only bolster the chances of many central banks shifting to more accommodative monetary policies next year.

In the Eurozone, the latest suite of economic data contained no major surprises, reflected in near-zero readings on both the region’s RPI (5) and RPI-P (1). With the last ECB meeting of the year rapidly approaching, steady key interest rates look all the more likely. That said, Thursday’s flash HICP report will need watching closely.

In the UK, overall economic activity has been undershooting market expectations for much of the time since mid-October, leaving financial markets all but convinced that the next move in Bank Rate will be down. At minus 16 and minus 10 respectively, the RPI and RPI-P remained in negative surprise territory last week.

In Japan, softer than expected October inflation pushed the RPI (minus 25) and RPI-P (minus 10) slightly further below zero. However, on average the economy has been outperforming since the start of the quarter, probably meaning that the BoJ will continue moving only gradually away from its ultra-loose monetary stance.

In the main, recent data in the U.S. have supported speculation that the Federal Reserve has finished its tightening cycle and, at minus 17, the latest reading for both the RPI and RPI-P remain consistent with that view.

By contrast, north of the border, a run of surprisingly robust reports has lifted the Canadian RPI to 21 and the RPI-P to a solid 33. Earlier this month the BoC signalled that it was unlikely to hike interest rates again any time soon, but the relative buoyancy of overall economic activity suggests little need for any early ease.