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US PCE inflation rises to 2.7% yoy in Mar, core PCE steady at 2.8% yoy

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    ActionForex.com
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    US personal income rose 0.5% mom or USD 122.0B in March, matched expectations. Personal spending rose 0.8% mom or USD 160.9B, above expectation of 0.6% mom.

    Both headline and core PCE price index rose 0.3% mom, matched expectations. Prices for services increased 0.4% mom and prices for goods increased 0.1% mom. Food prices decreased less than -0.1% mom and energy prices increased 1.2% mom.

    Over the 12-month period, headline PCE accelerated from 2.5% yoy to 2.7% yoy, above expectation of 2.6% yoy. Core PCE price index was unchanged at 2.8% yoy, above expectation of 2.6% yoy. Prices for services increased 4.0% yoy and prices for goods increased 0.1% yoy. Food prices increased 1.5% yoy and energy prices increased 2.6% yoy.

    Full US personal income and outlays release here.

    SNB’s Jordan: New shocks can occur any time

      By
      ActionForex.com
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      Speaking at SNB’s annual shareholder meeting, President Thomas Jordan highlighted the achievement in lowering inflation to below 2%, a milestone that enabled the bank to implement a rate cut last month.

      Despite this progress, Jordan emphasized the continuing high levels of uncertainty in the global economic environment, acknowledging the potential for new shocks at any time.

      “In the current environment, uncertainty remains elevated, and new shocks can occur at any time,” he noted. “We will therefore monitor the ongoing development of inflation closely and adjust our monetary policy again if necessary.”

       

      BoJ stands pat, lower growth and higher inflation this year

        By
        ActionForex.com
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        BoJ left overnight call rate unchanged at 0-0.10% as widely expected, by unanimous vote. The BOJ says it will continue its Japanese government bond (JGB) purchases “in accordance with the decisions made at the March 2024 monetary policy meeting.”

        Real GDP growth forecasts for fiscal 2024 was lowered sharply to 0.8%. But growth is expected to pick up moderately to 1.0% subsequently. CPI core forecasts was fiscal 2024 was raised to 2.8% and then slowed to 1.9% onwards. CPI core- core forecasts were left unchanged for both fiscal 2024 and 2025 at 1.9%. Fiscal 2026 CPI core-core is projected to pick up to 2.1%, which is a positive sign.

        Real GDP growth forecasts:

        • Fiscal 2024 at 0.8% (downgraded from 1.2%).
        • Fiscal 2025 at 1.0% (unchanged).
        • Fiscal 2026 at 1.0% (new).

        CPI core forecasts:

        • Fiscal 2024 at 2.8% (upgraded from 2.4%).
        • Fiscal 2025 at 1.9% (upgraded from 1.8%).
        • Fiscal 2026 at 1.9% (new).

        CPI core-core forecasts:

        • Fiscal 2024 at 1.9% (unchanged).
        • Fiscal 2025 at 1.9% (unchanged).
        • Fiscal 2026 at 2.1% (new).

        Japan’s Tokyo CPI falls sharply to 1.6% yoy in Apr, vs exp 2.2% yoy

          By
          ActionForex.com
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          Japan’s Tokyo CPI showed significant slowdown in April. CPI core (excluding food) dropped from 2.4% yoy to 1.6%, substantially below the expected 2.2% yoy.

          CPI core-core, which excludes both food and energy, also slowed from 2.9% yoy to 1.8% yoy, marking the slowest pace since September 2022.

          Services inflation, a significant component of the CPI, decreased from 2.7% yoy to 1.6% yoy. This notable drop is largely attributed to policy interventions by the Tokyo metropolitan government to make some educational tuition free.

          Overall headline CPI, which includes all items, also fell from 2.6% yoy to 1.8% yoy.

          US GDP expands 1.6% annualized in Q1, below expectations

            By
            ActionForex.com
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            US real GDP grew at an annualized rate of 1.6% in Q1, missing expectation of 2.1%, sharply lower than Q4’s 3.4%.

            Compared to the fourth quarter, the deceleration in real GDP in the first quarter primarily reflected decelerations in consumer spending, exports, and state and local government spending and a downturn in federal government spending. These movements were partly offset by an acceleration in residential fixed investment. Imports accelerated.

            Price index for gross domestic purchases increased 3.1% in Q1, compared with an increase of 1.9% in the Q4. Personal consumption expenditures (PCE) price index increased 3.4%, compared with an increase of 1.8%. Excluding food and energy prices, PCE price index increased 3.7%, compared with an increase of 2.0%.

            Full US GDP release here.

            ECB’s Schnabel identifies services inflation as primary concern

              By
              ActionForex.com
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              ECB Executive Board Member Isabel Schnabel acknowledged that the consensus that the path to disinflation is proving to be “quite bumpy,” especially as the process is in its “last mile”. The “biggest concern” is the persistent inflation within the services sector, which remains stubbornly high.

              Schnabel emphasized the importance of closely monitoring unit labor costs. She noted at a conference today, “One aspect that we are looking at very vigilantly is the development of unit labor cost.”

              “Wage growth remains relatively strong but it seems to be gradually easing in line with what we have in our projections,” she added.

              However, Schnabel expressed particular concern over another crucial economic indicator: “The more concerning part is productivity growth,” she remarked, as Eurozone has been experiencing negative productivity growth for several quarters.

              Germany’s Gfk consumer sentiment rises to -24.2, an extremely low two-year high

                By
                ActionForex.com
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                German Gfk Consumer Sentiment for May rose from -27.3 to -24.2, above expectation of -25.5. This marks the highest level in two years, although it remains significantly low by historical standards.

                In April, economic expectations rose from -3.1 to 0.7. Income expectations rose from -1.5 to 10.7. Willingness to buy rose from -15.3 to -12.6. Willingness to save rose from 12.4 to 14.9.

                Rolf Bürkl, consumer expert at NIM, attributed the stronger uplift in consumer sentiment mainly to the “noticeable increase in income expectations.” He elaborated that these expectations are closely tied to actual developments in real income, buoyed by rising wages and salaries alongside recent dip in inflation rates. This combination has laid a solid foundation for increasing purchasing power among households.

                Full German Gfk consumer sentiment release here.

                Yen’s selloff intensifies as BoJ meeting commences

                  By
                  ActionForex.com
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                  Yen’s selloff is intensifying and breaking through 155 mark against Dollar as BoJ commences its two-day policy meeting. While no changes in policy are anticipated at this gathering, the continued decline of Yen could provoke hawkish remarks from Governor Kazuo Ueda. He has clearly indicated that a policy adjustment would be considered if weakening Yen’s impact on inflation becomes too significant to overlook.

                  Attention is also turning towards BoJ’s new economic projections. Inflation forecasts for fiscal years 2024 and 2025 are expected to be upgraded from current predictions of 2.4% and 1.8%, respectively. For fiscal 2026, forecasts could suggest that core inflation will align closely with BoJ’s target of 2%.

                  Governmental response to Yen’s decline has so far been constrained. Finance Minister Shunichi Suzuki reiterated today that there has been no alteration in the government’s approach towards Yen’s valuation, emphasizing that actions will be taken as appropriate. He added that the government is “carefully monitoring” currency market movements, but declined from further comments.

                  Technically, strong resistance could be seen from 61.8% projection of 127.20 to 151.89 from 140.25 at 155.20 to limit USD/JPY’s rally on the first attempt. However, firm break of this level will put 100% projection of 140.25 to 150.87 from 146.47 at 157.09 as next near term target.

                  BoC members divided on rate cut timing, united on gradual easing approach

                    By
                    ActionForex.com
                    -

                    BoC’s April meeting summary revealed a “diversity of views” among its members concerning the timing of the first interest rate cut. Despite differing opinions, there was a unanimous agreement that any adjustment to monetary policy would “probably be gradual” once initiated.

                    Key concerns highlighted by some board members included the need for “more reassurance” regarding the diminishing risks associated with stalling of progress on slowing core inflation. These members observed that the Canadian economy is “performing well”, mitigating the risk that the current restrictive monetary policy could excessively decelerate economic activity. However, they cautioned that stronger domestic demand, alongside robust economic growth in the US, “keep core inflation from slowing further” or might even cause it to “pick up again in the event of new surprises”.

                    Conversely, other members argued that there is a tangible risk of maintaining a monetary policy that is “more restrictive than needed.” This group emphasized the significant progress already achieved in reducing inflation, noting that the rates of inflation across most goods and services had “come down significantly,” and the distribution of inflation rates among the CPI components had begun to “approach normal.”

                    Despite these differing perspectives, the consensus was clear that any forthcoming policy easing would be implemented cautiously. “While there was a diversity of views about when conditions would likely warrant cutting the policy rate, they agreed that monetary policy easing would probably be gradual, given risks to the outlook and the slow path for returning inflation to target,” the summary stated.

                    Full BoC summary of deliberations here.

                    US durable goods orders rises 2.6% mom in Mar, ex-transport orders up 0.2% mom

                      By
                      ActionForex.com
                      -

                      US durable goods orders rose 2.6% mom to USD 283.4B in March, above expectation of 2.5% mom. Ex-transport orders rose 0.2% mom to USD 187.5B, below expectation of 0.3% mom. Ex-defense orders rose 2.3% mom to USD 268.1B, above expectation of 2.0% mom. Transportation equipment orders rose 7.7% to USD 95.9B.

                      Full US durable goods orders release here.

                      Canada’s retail sales down -0.1% mom in Feb

                        By
                        ActionForex.com
                        -

                        Canada’s retail sales fell -0.1% mom to CAD 66.7B in February, worse than expectation of 0.1% mom rise. Sales were down in five of nine subsectors and were led by decreases at gasoline stations and fuel vendors (-2.2% mom).

                        Core retail sales, which exclude gasoline stations and fuel vendors and motor vehicle and parts dealers, were unchanged for the month.

                        Advance estimate indicates that retail sales was unchanged in March.

                        Full Canada retail sales release here.

                        German Ifo business climate rises to 89.4, economy stabilizing thanks to service providers

                          By
                          ActionForex.com
                          -

                          German Ifo Business Climate rose from 87.8 to 89.4 in April, above expectation of 88.5. Current Assessment Index rose from 88.1 to 88.9, above expectation of 88.7. Expectations Index also improved from 87.5 to 89.9, above expectation of 88.9.

                          By sector, manufacturing rose from -9.9 to -8.5. Services rose from 0.4 to 3.2. Trade rose from -22.9 to -22.0. Construction rose from -33.2 to -28.5.

                          If said, “Companies were more satisfied with their current business. Their expectations also brightened. The economy is stabilizing, especially thanks to service providers.”

                          Full German Ifo release here.

                          ECB’s Nagel cautions: June rate cut may not lead to further easing

                            By
                            ActionForex.com
                            -

                            At a conference today, Joachim Nagel, Bundesbank President and ECB Governing Council member, said that if data in the next six weeks bolster confidence in achieving ECB’s 2% inflation target, he would support a reduction in interest rates in June. However, he emphasized that “such a step would not necessarily be followed by a series of rate cuts.”

                            He stressed the current climate of uncertainty, noting, “Given the current uncertainty, we cannot pre-commit to a particular rate path.” This approach underscores ECB’s strategy of making decisions “meeting by meeting and based on incoming data.”

                            Further, Nagel admitted of his reservations and expressed that he is “not fully convinced yet” that price growth is firmly on a path toward target. Core inflation, particularly within the services sector, remains elevated, driven by persistent strong wage growth, which tends to be more durable than goods inflation.

                            Nevertheless, by June “we will know a lot more,” about the inflation path, he added.

                            Australia CPI slows less than expected in Q1, accelerates in Mar

                              By
                              ActionForex.com
                              -

                              In Q1, Australia’s CPI slowed from 4.1% yoy to 3.6% yoy, exceeding market expectations of 3.4% yoy. Similarly, trimmed mean CPI, which excludes volatile price items and provides a clearer view of underlying inflation trends, also decelerated less than expected, moving from 4.2% yoy to 4.0% yoy, against predictions of 3.8% yoy.

                              The breakdown by category shows a general slowdown across the board. Goods inflation decreased from 3.8% yoy to 3.1% yoy, while services inflation eased from 4.6% yoy to 4.3% yoy. Tradeable inflation, which includes items that can be imported or exported, slowed more significantly from 1.5% yoy to 0.9% yoy. Non-tradeable inflation, representing goods and services not exposed to international markets, also saw a reduction from 5.4% yoy to 5.0% yoy.

                              However, on a quarterly basis, CPI rose by 1.0% qoq in Q1, marking an acceleration from the previous quarter’s 0.6% qoq and outpacing expectations of a 0.8% rise. This quarterly increase suggests that, despite the annual slowdown, price pressures within the economy intensified at the start of the year. Trimmed mean CPI on a quarterly basis mirrored this trend, rising 1.0% qoq compared to the previous 0.8% qoq, also surpassing the expected 0.8% qoq.

                              Monthly figures reinforce the notion of persistent inflationary pressures, with CPI ticking up from 3.4% yoy to 3.5% yoy, again exceeding expectations.

                              Full Australia CPI release here.

                              New Zealand’s goods exports rises 3.8% yoy in Mar, imports fell -25% yoy

                                By
                                ActionForex.com
                                -

                                New Zealand’s goods exports rose 3.8% yoy to NZD 6.5B in March. Goods imports fell -25% yoy to NZD 5.9B. Monthly trade balance was a surplus of NZD 588m, versus expectation of NZD -505m deficit.

                                Exports to US and EU showed increases of 8.0% yoy and 3.6% yoy respectively. However, exports to major trading partners like China (-1.9% yoy), Australia (-3.7% yoy), and Japan (-15% yoy) declined.

                                On the import side, there were significant reductions across all major partners. Imports from EU saw the sharpest decline at -43% yoy, followed closely by US at -42% yoy. Imports from China, Australia, and South Korea were down -20% yoy, -13% yoy, and -21% yoy respectively.

                                Full New Zealand trade balance release here.

                                US PMI composite falls to 50.9, economic upturn loses momentum

                                  By
                                  ActionForex.com
                                  -

                                  US PMI Manufacturing fell from 51.9 to 49.9 in April. PMI Services fell from 51.7 to 50.9. PMI Composite fell from 52.1 to 50.9.

                                  Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said:

                                  “The US economic upturn lost momentum at the start of the second quarter, with the flash PMI survey respondents reporting below-trend business activity growth in April. Further pace may be lost in the coming months, as April saw inflows of new business fall for the first time in six months and firms’ future output expectations slipped to a five-month low amid heightened concern about the outlook.

                                  “The more challenging business environment prompted companies to cut payroll numbers at a rate not seen since the global financial crisis if the early pandemic lockdown months are excluded.

                                  “The deterioration of demand and cooling of the labor market fed through to lower price pressures, as April saw a welcome easing in rates of increase for selling prices for both goods and services.

                                  “Notably, the drivers of inflation have changed. Manufacturing has now registered the steeper rate of price increases in three of the past four months, with factory cost pressures intensifying in April amid higher raw material and fuel prices, contrasting with the wage-related services-led price pressures seen throughout much of 2023.”

                                  Full US PMI release here.

                                  BoE’s Pill: Rate cut somewhat closer but still some way off

                                    By
                                    ActionForex.com
                                    -

                                    BoE Chief Economist Huw Pill indicated in a speech today that while a rate cut is “somewhat closer” now, it remains “some way off” in his baseline scenario.

                                    Pill emphasized that the MPC’s evaluation of the inflation outlook is concentrated on the “persistent component” of consumer price inflation. This focus includes three critical indicators: services price inflation, pay growth, and the tightness of the UK labor market.

                                    Pill noted current signs of “downward” shift in the persistent components of inflation dynamics. However, he also highlighted that there is still a “reasonable way” to go before he can be convinced that the underlying inflation has stabilized at rates consistent with achieving the 2% inflation target sustainably.

                                    Given these conditions, Pill underscored the need for the MPC to “maintain a degree of restrictiveness” in monetary policy to effectively “squeeze the persistent component out of the system.”

                                    BoE’s Haskel: Inflation outlook hinges on quick reduction of job vacancies to unemployment ratio

                                      By
                                      ActionForex.com
                                      -

                                      During a seminar today, BoE MPC member Jonathan Haskel emphasized the critical role of the labor market in shaping the UK’s inflation outlook.

                                      Haskel pointed out that the labor market tightness, specifically the ratio of job vacancies to unemployment, is a key factor in assessing inflationary pressures. Although this ratio is gradually decreasing, Haskel expressed concern over the pace, stating it is “rather slowly” and it remains uncertain if it is sufficient to align inflation with the target levels.

                                      “The persistence of inflation depends a lot on how quickly that ratio comes down,” Haskel remarked, underscoring the direct impact of labor market conditions on inflation trends.

                                      ECB’s de Guindos: June cut a failt accompli, uncertain afterwards

                                        By
                                        ActionForex.com
                                        -

                                        In an interview with Le Monde, ECB Vice President Luis de Guindos indicated barring any surprises, a June rate cut is a “fait accompli.”

                                        “If things move in the same direction as they have in recent weeks, we will loosen our restrictive monetary policy stance in June,” he said.

                                        However, looking beyond June, the Vice President expressed considerable caution due to heightened levels of uncertainty. “I’m inclined to be very cautious,” said de Guindos.

                                        Full interview of ECB’s de Guindos here.

                                        UK PMI composite rises to 54, sustainable path to target inflation not achieved yet

                                          By
                                          ActionForex.com
                                          -

                                          UK PMI Manufacturing fell from 50.3 to 48.7 in April, below expectation of 50.2. PMI Services rose from 53.1 to 54.9, above expectation of 50.2, and an 11-month high. PMI Composite rose from 52.8 to 54.0, also an 11-month high.

                                          Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, stated that UK economy’s rebound from last year’s recession “continued to gain momentum”. He noted that GDP is now growing at an increased quarterly rate of 0.4%, up from 0.3% in the first quarter.

                                          This economic upturn has led to increased hiring, driven further by the rise in the National Living Wage in April. However, these factors have also escalated cost pressures significantly. Although the inflation of selling prices has moderated slightly, the combination of rising costs and solid demand could lead businesses to hike prices in the near future.

                                          “While the improving economic recovery picture is welcome news, the upward pressure on inflation will add to concerns that a sustainable path to below target inflation has not yet been achieved,” he added.

                                          Full UK PMI release here.

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