Global RPI at minus 20; US turns lower, China stays lower

The US has pulled down the Relative Performance Index (RPI) to minus 20 for global data overall and to minus 17 less prices (RPI-P). The downturn in the US RPI, which is now in sizable contraction at minus 38 and at minus 44 for the RPI-P, reflects both the rolling off strong earlier results in the calculation and the last week’s run of disappointing results, disappointment however that isn’t yet signaling any fundamental trouble for the US economy nor pulling forward a Federal Reserve rate cut.

In the Eurozone, upside surprises on headline and core inflation kept the RPI above zero at 15 and further reduced the likelihood of a cut in ECB interest rates on Thursday. At 4, the RPI-P shows real economic activity performing much as expected but still leaves an economy struggling to keep its head above water.

In Switzerland, a mixed bag of economic data saw the RPI close the week at minus 21, indicating a clear shortfall in overall economic activity versus expectations. However, with the inflation-adjusted RPI-P at exactly zero, downside surprises have been mainly limited to prices and it is this that the Swiss National Bank will be focusing on at its policy meeting later this month. A cut in the policy rate remains a possibility.

In the UK, economic activity continues to surprise on the upside and at 43 and 42 respectively, both the RPI and RPI-P show forecasters have been well wide of the mark. Pressure on the Bank of England to deliver an early rate cut has diminished further.

In Japan, surprisingly strong inflation data combined with unexpectedly soft goods production and retail sales leave the RPI at minus 1. The RPI-P is rather weaker at minus 13 but the Bank of Japan remains on course to tighten. However, the need to assess the results of ongoing wage negotiations would seem to rule out a move before April at the earliest.

By contrast, in China, both the RPI (minus 43) and RPI-P (minus 60) have been negative since late-January sustaining pressure on the authorities to provide further economic stimulus.

Fourth-quarter growth in Canada, however meager, matched expectations and means that the economy avoided recession in 2023. In fact, at minus 1, the RPI-P shows recent real economic activity in general behaving as forecast. Nonetheless, with the RPI at minus 15, downside surprises continue to dominate the inflation data which keeps open the door for a Bank of Canada rate cut, albeit very unlikely at Wednesday’s meeting.