Global data roughly hitting forecasts; China underperforming

Global economic data came in a bit nearer to forecasts in the prior week, improving to minus 8 on the Relative Performance Index (RPI) and minus 11 less prices (RPI-P). These scores are only slightly negative and aren’t signaling any immediate bias for Econoday’s Global Policy Rate (a weighted average of major central banks) which stands at 4.29 percent.

In the Eurozone, an essentially empty data calendar saw the RPI hold steady at 8 and the RPI-P at 2, both close enough to zero to indicate economic activity is performing much as expected and financial markets are confident of no change in policy from the ECB on Thursday.

Similarly, there was no significant data released from Canada. This left the RPI at 21 and the RPI-P at 8. While both readings are currently in positive surprise territory, there has been a clear bias towards sub-zero readings since mid-April. Consequently, there is still considerable speculation about another easing at the Bank of Canada’s next policy meeting on July 24. Tuesday’s June CPI update could be the deciding factor.

In the UK, unexpectedly strong GDP for the month of May kept the RPI (6) and RPI-P (11) modestly in positive surprise territory but all eyes this week will be on Wednesday’s inflation update and Thursday’s labour market report. Developments here will be key to the outcome of Bank of England’s next policy meeting in August.

In Japan, a slower than forecast recovery in manufacturing helped to trim the RPI to minus 10 and RPI-P to minus 22. The Bank of Japan is still widely seen tapering its QE programme at the end of the month but with overall economic activity underperforming, the timing of the next increase in central bank interest rates remains uncertain. To this end, Friday’s CPI report will have an important impact on market sentiment.

In China, further signs that domestic prices are not keeping up with expectations left both the RPI (minus 29) and RPI-P (minus 30) well below zero. Recent policy measures may mean that another cut in key interest rates will not be necessary but with any monetary tightening a long way down the road, the yuan is likely to remain under pressure.

Helped by an unexpected fall in jobless claims, both the RPI and RPI-P for the US improved to minus 4 each, indicating that forecasters are correctly gauging the degree of the country’s slowdown and price cooling.