Economic Snapshot for the Week Ahead: Week of May 9, 2022

The following is an excerpt from S&P Global Market Intelligence’s latest Week Ahead Economic Preview. For the full report, please click on the “Download full report” link.

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US and China inflation data, Chinese trade and UK production figures at a glance

Inflation data will be the main focus for the coming week with numbers due both United States and China for April. A series of Fed appearances will also be anticipated after the Fed’s FOMC meeting in May, as will data on US consumer sentiment. Meanwhile
China publishes a series of data including
business data amid ongoing COVID-19 disruptions. The UK GDP data in March and
eurozone industrial production the numbers are also aligned in the coming week.

US stocks rallied after the Fed’s May FOMC meeting this week, in which the Fed executed the biggest interest rate hike in 22 years. The rally represented a sigh of relief from both the avoidance of a potentially larger 75 basis point (bp) hike in May and the assurance from Fed Chairman Jerome Powell that they won’t. are not considering 75bp hikes at future meetings. That said, the Fed remains committed to reining in inflation and the latest PMI data suggests pricing pressures in the US private sector intensified further in April. As such, next week’s CPI and PPI releases for April will be at the center of any indications of larger than expected price increases that may spook the market. Comments from Fed speakers will also be scrutinized over the coming week for any suggestions that the Fed could raise more than the 25 basis points currently priced in by the market for the June meeting, and the extent to which policy makers can engineer a soft landing for the economy.

In Asia-Pacific, a barrage of economic data will be expected from China, with a focus on both inflation figures and trade data. According to the latest PMI figures, recent COVID-19-related social distancing measures in mainland China have continued to significantly hurt economic growth. Indications of diverging trends for factory gate inflation and consumer price inflation seemed to be the case in April, making it a month to watch. Meanwhile, trade data is likely to suggest continued disruption from ongoing lockdown restrictions.

Finally, after the Fed, Bank Negara Malaysia (BNM) is expected to raise its overnight rate by 25 basis points according to our forecast. A series of GDP and CPI data will also be released for Southeast Asian economies, including Indonesia and the Philippines.

Policymakers juggle runaway inflation and rising recession risks

Last week, central bank policy in the US and UK was tightened as inflation continued to hit multi-decade highs. Recent PMI data showed that official CPI inflation rates could rise further, after April data showed a further acceleration in the costs and selling prices of goods and services around the world. Further record increases in selling prices were observed in the United States, the euro zone and the United Kingdom. However, at the same time, surveys showed that the pace of global economic growth was slowing amid headwinds from the Ukraine-Russia war and new COVID-19-related lockdowns in mainland China.

Central banks therefore face the unenviable task of controlling inflation while minimizing the damage to the economy from tighter policy, but it is clear from the latest PMI data that the risk of a global economic slowdown in the coming months has increased. Risks are highest in Europe, but growth is set to weaken further in all major developed economies: business optimism has collapsed across the board and growth looks increasingly dependent on a rebound spending on consumer services post-lockdown, which by definition will prove to be temporary . Higher interest rates will also not help dampen short-term inflation, which is fueled by factors related to energy supply and prices. On the contrary, higher borrowing costs will only worsen the cost of living crisis and further dampen consumer spending. How quickly growth slows will therefore be a key factor to assess over the coming months.

Calendar key events

Monday May 9
Market Festival in China (Mainland)
BOJ Japan Meeting Minutes (March)
Japan in Jibun Bank Services PMI* (April)
China (Mainland) Trade (April)
Inflation in Indonesia (April)
Manufacturing production in Norway (March)
Taiwan Trade (April)
Eurozone Sentix Index (May)
Canadian Building Permit (March)
US Wholesale Stocks (March)
Indonesia GDP (Q1)

tuesday 10 may
Japan All household expenditure (March)
Retail trade in Australia (Q1)
Malaysia Industrial Production YY (March)
UK business investment (Q1)
UK Goods Trade Balance (March)
Norway Consumer Price Index (April)
Germany ZEW Economic Sentiment (May)
China (mainland) M2, new yuan loans, loan growth (April)

Wednesday May 11
China (Mainland) CPI and PPI (April)
CPI Germany (April, final)
Malaysia Overnight Policy Rate (May 11)
US CPI (April)

Thursday May 12
Japan BOJ Advisory Summary (April)
RICS UK housing survey (April)
UK GDP, incl. Manufacturing, services and construction output (March and Q1)
Japan Current Account (March)
Philippines GDP (Q1)
CPI India (Apr.)
Industrial production in India (March)
Initial unemployment claims in the United States
IPP United States (April)

Friday May 13
New Zealand Manufacturing PMI (April)
Norway GDP (Q1)
Eurozone industrial production (March)
US import prices (April)
US UoM Sentiment (May, Preliminary)

* Index press releases produced by S&P Global and relevant sponsors
can be found here.

What to watch

North America: US Inflation Data, Fed Speakers

April’s US CPI and PPI figures will be in focus after the Fed’s FOMC meeting this week, where the focus was reiterated on controlling inflation. Although the Fed Powell has pushed back on the likelihood of a bigger 75 basis point hike in future meetings, the Fed Chairman nonetheless acknowledged that ‘some pain’ could be felt with the central bank keen to rein in the surge in inflation. The extent of the price surge in April will therefore be one to watch closely. The latest S&P Global US Composite PMI revealed that inflationary pressures intensified further in April.

Additionally, a series of Fed appearances are expected in the coming week, which would provide an update on the Fed’s thoughts after the FOMC meeting in May.

Europe: UK Q1 GDP, Eurozone Industrial Production, German ZEW Survey

UK GDP data for March and the first quarter will be released, along with quarterly growth data. According to the S&P Global/CIPS UK Composite PMI, private sector output growth accelerated in March, supported by an acceleration in service sector growth as manufacturing expansion slowed.

Elsewhere, Eurozone industrial production data for March will be released on Friday. This follows the S&P Global Eurozone Manufacturing PMI update which showed both the manufacturing PMI and the production index falling to multi-month lows due to heightened geopolitical tensions and growing supply chain pressures. ‘supply.

Asia-Pacific: April trade, inflation and money supply data from China, BNM meeting, GDP and CPI data from Indonesia, GDP from the Philippines and inflation from India

In APAC, a series of China data releases, including trade, price and money supply figures, will be updated for April.

Attention will be on China’s inflation figures following reported price increases in the manufacturing sector, according to the Caixin Manufacturing PMI, suggesting higher factory-gate inflation. On the other hand, the selling prices of services fell according to the PMI Caixin Services. Trade data will also be watched after PMI export orders fell in the manufacturing and services sectors in April.

Special reports

Global factory output falls for the first time since June 2020 as supply conditions deteriorate -Chris Williamson

Economic impact of the Russian-Ukrainian war on the ASEAN region – Rajiv Biswas

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Purchasing Managers’ Index™ (PMI™) data is compiled by IHS Markit for over 40 economies worldwide. Monthly data are drawn from surveys of senior executives of private sector companies and are available by subscription only. The PMI data set includes a headline figure, which indicates the overall health of an economy, and sub indices, which provide insight into other key economic drivers such as GDP, inflation, exports, l utilization, employment and stocks. PMI data is used by finance and business professionals to better understand where economies and markets are going and to uncover opportunities.

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