Eurozone unemployment rate dropped from 6.7% to 6.6% in May, better than expectation of 6.8%. EU unemployment rate was unchanged at 6.1%. Eurostat estimates that 13.066m men and women in the EU, of whom 11.004m in the Eurozone , were unemployed in May
Swiss KOF Economic Barometer dropped from 97.7 to 96.9 in June, slightly above expectation of 96.8. It’s now below long-term average for the second month in a row. KOF said, “the outlook for the Swiss economy in the upcoming months therefore remains subdued.”
KOF added: “The downward movement of the barometer is primarily driven by bundles of indicators for foreign demand and manufacturing. Only indicators for the financial and insurance services sector and for the construction sector are at a nearly constant level. However, indicator bundles for private consumption show a slight positive trend.”
France consumer spending rose 0.7% mom in May, slightly above expectation of 0.6% mom. That’s the first increase after five months of contraction. The increase was almost exclusively due to the clear rebound in consumption of manufactured goods (+2.7% after -1.3% in April). Food consumption was stable (+0.1% after -1.2%) while energy consumption decreased significantly (-2.6% after +1.9%).
China official PMI Manufacturing rose from 49.6 to 50.2 in June., above expectation of 49.6. Sub-index for production rose to 52.8, highest since March 2021. PMI Non-Manufacturing rose from 47.8 to 54.7, above expectation of 52.5. That’s also the highest level in 13 months.
“Even though the manufacturing sector continued to recover this month, 49.3 percent of the companies reported orders were insufficient,” said Zhu Hong, senior statistician at NBS. “Soft market demand is still the main problem facing the manufacturing industry.”
New Zealand ANZ Business Confidence dropped from -55.6 to -62.6 in June. Own activity outlook dropped from -4.7 to -9.1. Investment intentions dropped from 8.6 to -3.2. Employment intentions dropped form 6.1 to 0.7. Cost expectations eased from 95.5. to 93.5. Pricing intentions rose from 71.0 to 73.7. Inflation expectations eased from 6.18 to 6.02.
ANZ said: ” For now, supply-side issues remain firms’ biggest problems: finding skilled labour, costs, and wages being the top three. The RBNZ needs those problems to ease, and weakening demand to move up the charts. That’s what’s required to bring inflation pressure down.
“Of course, weaker demand might ease the overtime, but it’s unlikely to enhance profitability. That moment of happy equilibrium between demand and supply may prove fleeting, with the RBNZ entirely willing to incur the risk of a hard landing to ensure the long-term structural health of the economy in terms of well-anchored inflation expectations.”
Japan industrial production dropped -7.2% mom in May, much worse than expectation of -0.3% mom. That was also the worst contraction in two years, since the -10.5% mom decline in May 2020.
The index of production at factories and mines stood at 88.3 against the 2015 base of 100. Index of industrial shipments dropped -4.3% mom to 89.0. Inventories dropped -0.1% mom to 98.5.
Nevertheless, manufacturers surveyed by the Ministry of Economy, Trade and Industry (METI) expected output to rebound 12.0% in June, followed by a 2.5% expansion in July.
BoE Governor Andrew Bailey said the central bank has options to act “forcefully” to tackle inflation if needed. “There will be circumstances in which we will have to do more. We’re not there yet in terms of the next meeting. We’re still a month away, but that’s on the table,” Bailey said. “But, you shouldn’t assume its the only thing on the table.”
Bailey also noted that the UK economy was “very clear” at a turning point and starting to slow. As inflation is shifting from goods and into energy and food prices, BoE would watch the development “very, very carefully”.
Fed Chair Jerome Powell said in a panel discussion at the ECB forum that the “the clock is kind of running on how long will you remain in a low-inflation regime … The risk is that because of the multiplicity of shocks you start to transition into a higher inflation regime and our job is to literally prevent that from happening and we will prevent that from happening,”
Fed’s “aim” now is to raise interest rates without trigger a recession. And, ” we believe there are pathways to achieve that”.
“We hope that growth will remain positive,” Powell. “Overall the US economy is well positioned to withstand tighter monetary policy.”
Eurozone Economic Sentiment Indicator dropped from 105.0 to 104.0 in June. Employment Expectation Indicator dropped from 112.6 to 110.9. Economic Uncertainty Indicator rose from 23.4 to 24.8. Industry confidence rose from 6.5 to 7.4. Services confidence rose from 14.1 to 14.8. Consumer confidence dropped from -21.2 to -23.6. Retail trade confidence dropped from -4.2 to -5.1. Construction confidence dropped from 6.3 to 3.7.
EU Economic Sentiment Indicator dropped from 104.2 to 102.5. Employment Expectation Indicator dropped from 112.2 to 110.6. Economic Uncertainty Indicator rose from 22.6 to 23.9. The ESI fell across the six largest EU economies: confidence dropped most markedly in the Netherlands (-3.6), but also in Germany (-1.9), Spain (-1.9), Poland (-1.5), France (-1.0) and Italy (-1.0).
Cleveland Fed President Loretta Mester told CNBC today, “if conditions were exactly the way they were today going into that meeting (in July) — if the meeting were today — I would be advocating for 75 because I haven’t seen the kind of numbers on the inflation side that I need to see in order to think that we can go back to a 50 increase.”
“I think getting interest rates up to that 3-3.5%, it’s really important that we do that, and do it expeditiously and do it consistently as we go forward, so it’s after that point where I think there is more uncertainty about how far we’ll need to go in order to rein in inflation,” she said.
“At the Fed, we’re on a path now to bring our interest rates up to a more normal level and then probably a little bit higher into restrictive territory, so that we can get those inflation rates down so that we can sustain a good economy going forward,” she said. “Job one for us now is to get inflation rates under control, and I think right now that’s coloring how consumers are feeling about the economy and where it’s going.”
ECB Governing Council member Gediminas Simkus said that by July meeting, “should see some change in the data, some change in relation to what we have seen at the beginning of June”. He added, “if we see this change in data that points to the persistence of inflation, to its acceleration, 50 basis points should be a policy option for July.”
“With these levels of inflation and inflation being more and more broad-based, with wages growing in the euro area, we should move decisively toward monetary-policy normalization,” said Simkus,
ECB has pre-committed to a 25bps rate hike in July. Another hike is also pre-committed for September, but the size would be dependent on incoming data.
Australia retail sales rose 0.9% mom in May, above expectation of 0.4% mom. That’s the fifth consecutive monthly growth.
Ben Dorber, Director of Quarterly Economy Wide Statistics said, “There was growth across five of the six retail industries in May as spending remained resilient. Higher prices added to the growth in retail turnover in May. This was most evident in cafes, restaurants and takeaway food services and food retailing.”
BoJ Governor Haruhiko Kuroda said, “Unlike other economies, the Japanese economy has not been much affected by the global inflationary trend, so monetary policy will continue to be accommodative,” according to the recording released by the Bank for International Settlements (BIS).
After 15 years of deflation that lasted through 2013, businesses have be “very cautious” in raising prices and wages. “The economy recovered and companies recorded high profits. The labour market became quite tight. But wages didn’t increase much and prices didn’t increase much,” he added.
New York Fed President John Williams told CNBC today, “A recession is not my base case right now. I think the economy is strong. Clearly financial conditions have tightened and I’m expecting growth to slow this year quite a bit relative to what we had last year.”
“But that’s not a recession,” he noted. “It’s a slowdown that we need to see in the economy to really reduce the inflationary pressures that we have and bring inflation down.”
On interest rate, Williams said, “we’re far from where we need to be”. Rate can rise from current 1.50-1.75% to 3-3.5%. “My own baseline projection is we do need to get into somewhat restrictive territory next year given the high inflation, the need to bring inflation down and really to achieve our goals,” he said. “But that projection is about a year from now. Of course, we need to be data dependent.”
US Conference Board Consumer Confidence Index dropped from 103.2 to 98.7 in June, below expectation of 100. That’s also the lowest level since February 2021 (95.2). Present Situation Index dropped slightly from 147.4 to 147.1. But Expectations Index dropped sharply from 73.7 to 66.3, lowest since March 2013.
Lynn Franco, Senior Director of Economic Indicators at The Conference Board: “Consumers’ grimmer outlook was driven by increasing concerns about inflation, in particular rising gas and food prices. Expectations have now fallen well below a reading of 80, suggesting weaker growth in the second half of 2022 as well as growing risk of recession by year-end.”
US goods exports rose USD 2B to USD 176.6B in May. Goods imports dropped USD -0.4B to USD 280.9B. Goods trade deficit narrowed from USD -106.7B to USD -104.3B, still above expectation of USD -101.7B.
Wholesale inventories rose 2.0% to USD 880.6B. Retail inventories rose 1.1% to USD 705.3B.
ECB President Christine Lagarde said in a speech, “based on the overall outlook, the process of normalizing our monetary policy will continue in a determined and sustained manner.” However, given the uncertainty, “the pace of interest rate normalization cannot be defined ex ante.” She emphasized that the appropriate policy stance has to incorporate the “principles of gradualism and optionality”.
As for policy moves ahead, Lagarde reiterated that ECB will end net asset purchases on July 1, then hike the three interest rates by 25bps at next meeting on July 21. Also, “a larger increment” would be appropriate at the September meeting, “if the medium-term inflation outlook persists or deteriorates”.
Beyond September, the Governing Council has agreed that a “gradual but sustained” path of further rate increases will be appropriate. “The starting point at each meeting will be an assessment of the evolution of the shocks, their implications for the outlook and the degree of confidence we have in inflation converging to our medium-term target,” she said.
ECB Governing Council member Martins Kazaks told BloombergTV today that if the central bank hikes by 25bps in July, then a 50bps hike might be needed in September. He argued that ECB might need to considering a 50bps hike in July instead.
“If we see that the situation has worsened, that inflation is high and we see negative news in terms of inflation expectations, then in my view front-loading the increase would be a reasonable choice,” he said.
Germany Gfk consumer sentiment. for July dropped from -26.2 to -27.4, better than expectation of -27.7. But that’s nonetheless another record low since 1991.
In June, economic expectations dropped from -9.3 to -11.7. Consumers continue to see a significant risk of recession in Germany. Income expectations dropped from -23.7 to -33.5, worst reading in almost 20 years. Propensity to buy dropped from -11.1 to -13.7, worst since 2008.
“The ongoing war in Ukraine and disruptions in supply chains are causing energy and food prices in particular to skyrocket, resulting in a gloomier consumer climate than ever before”, explains Rolf Bürkl, GfK consumer expert. “Above all, the increase in the cost of living, which is almost eight percent at present, is weighing heavily on consumer sentiment and sending it into a downward spiral.”
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Canada GDP grew 0.3% mom in Apr, but to contract -0.2% in May
Canada GDP grew 0.3% mom in April, matched expectations. Both goods-producing (+0.9%) and services-producing (+0.1%) industries were up, as 13 of 20 industrial sectors expanded.
However, advanced information suggests that real GDP contracted -0.2% mom in May, with output down in mining, quarrying and oil and gas extraction, manufacturing and construction sectors.
Full release here.