Swiss CPI falls to -0.1% yoy, first negative since 2021

    Swiss consumer inflation turned negative in May for the first time since March 2021, with headline CPI falling -0.1% yoy, down from 0.0% in April yoy. Core inflation, which strips out volatile components such as fresh food and energy, slipped to 0.5% yoy from 0.6% yoy previously.

    On a monthly basis, both headline and core CPI rose 0.1%, in line with expectations.

    The breakdown reveals that domestic product prices grew just 0.2% mom and decelerated to from 0.8% yoy to 0.6% yoy. Imported goods prices were flat on the month and fell -2.4% yoy, ticked up from -2.5% yoy.

    Full Swiss CPI release here.

    RBA’s Hunter: AUD’s recent resilience linked to global shift away from USD exposure

      RBA Chief Economist Sarah Hunter addressed the unusual behavior of the Australian Dollar in recent months in a speech today. She highlighted that while initial moves were consistent with past risk-off episodes, the currency’s subsequent rebound against the US Dollar stood out as “more unusual”.

      On a “trade-weighted” basis, AUD has remained broadly stable, even though it has appreciated against the greenback and the Chinese renminbi, while weakening against most other major currencies.

      This divergence, Hunter explained, stems from “offsetting factors”. Global growth concerns have pressured the AUD against safe-haven and cyclical peers, while simultaneous outflows from US assets have weakened the US Dollar.

      Hunter cautioned that it’s too soon to tell whether this trend will persist, but acknowledged that recent market behavior reflects shifting investor sentiment, particularly toward capital reallocation away from US assets. As a result, Australian Dollar’s relative resilience against USD may be underpinned by portfolio rebalancing and perceived relative economic stability.

      Hunter noted that the trade-weighted index has reverted to “pre-shock values”, suggesting minimal net change in the foreign-currency value of Australian exports. However, the “relative move of capital” into Australia, at a time when the US is facing policy and tariff-related volatility, could offer some support to “domestic investment activity”, providing a cushion to the broader economy amid global uncertainties.

      Full speech of RBA’s Hunter here.

      BoJ’s Ueda: Ready to hike if wage growth recovers from tariff drag

        BoJ Governor Kazuo Ueda told parliament today that recently imposed U.S. tariffs could weigh on Japanese corporate sentiment, potentially impacting winter bonus payments and next year’s wage negotiations.

        He acknowledged that wage growth may “slow somewhat” in the near term due to these external pressures. However, Ueda expressed confidence that wage momentum would eventually “re-accelerate”, helping to sustain a moderate growth in household consumption.

        Looking ahead, Ueda reiterated the BoJ’s readiness to adjust its ultra-loose policy if the economy evolves in line with its projections. “If we’re convinced our forecast will materialize, we will adjust the degree of monetary support by raising interest rates,” he said.

        However, he cautioned that uncertainty surrounding the economic outlook remains “extremely high.”

         

        Caixin PMI manufacturing drops to 48.3, as China faces marked weakening at start of Q2

          China’s manufacturing sector unexpectedly shrank in May, with Caixin PMI falling to 48.3 from 50.4, well below market expectations of 50.6. This marked the first contraction in eight months and the lowest reading since September 2022.

          According to Caixin Insight’s Wang Zhe, both supply and demand weakened, with a particularly notable drag from overseas demand. Employment continued to contract, pricing pressures remained subdued, and logistics saw moderate delays. Although business optimism saw a marginal recovery, the broader picture points to intensifying headwinds.

          The report highlights the fragile start to Q2, with Wang pointing to a “marked weakening” in key economic indicators and a “significantly intensified” level of downward pressure.

          Full China Caixin PMI manufacturing release here.

          RBA Minutes: 25bps cut chosen for caution and predictability after debating hold and 50bps options

            RBA’s May 20 meeting minutes revealed that policymakers weighed three policy options—holding rates, a 25bps cut, or a larger 50bps reduction—before ultimately opting for a modest 25bps cut to 3.85%.

            The case for easing hinged on three key factors: sustained progress in bringing inflation back toward target without upside surprises, weakening global conditions and household consumption, and the view that a cut would be the “path of least regret” given the risk distribution.

            While members discussed a 50bps reduction after deciding to ease, they found the case for a larger move unconvincing. Australian data at the time showed little evidence that trade-related global uncertainty was materially harming domestic activity. Furthermore, some scenarios might even result in upward pressure on inflation, prompting caution. The Board also assessed that it was “not yet time to move monetary policy to an expansionary stance”.

            Ultimately, the Board judged that to move “cautiously and predictably” was more appropriate.

            Full RBA minutes here.

            Fed’s Goolsbee warns against repeating ‘transitory’ mistake on tariff inflation

              Chicago Fed President Austan Goolsbee said in a webcast overnight that tariffs typically lead to a one-time price increase rather than sustained inflation.

              Drawing on textbook theory, he said a 10% tariff would create a 10% rise in prices for imported goods for “one year”, after which the inflationary effect dissipates. Such shocks are usually seen as “transitory” by central banks, Goolsbee explained.

              However, he warned against underestimating potential risks, citing lessons from the pandemic-era supply chain disruptions. “We learned the last time around” not to dismiss inflation too quickly, Goolsbee said, referencing how persistent inflation caught the Fed off guard.

              He added that scenarios combining rising prices and weakening labor markets, a stagflationary mix, present the most difficult challenge for monetary policy, as “there’s not an obvious playbook”.

              Fed’s Logan: Tariff-led price shocks must not become persistent inflation

                Dallas Fed President Lorie Logan said the current monetary policy setting is “well-positioned to to shifting risks. Speaking at a conference, Logan emphasized that Fed’s job is to prevent temporary price shocks, such as those from tariffs, from becoming an “ongoing persistent problem of inflation”.

                Logan highlighted that tariff-related inflation and broader policy uncertainty present dual threats: not only could they lift prices, but they might also undermine confidence and growth by generating market volatility.

                However, she acknowledged that so far the economy has shown resilience, with labor markets remaining balanced and overall conditions stable.

                US manufacturing remains subdued as ISM PMI falls to 48.5

                  US ISM Manufacturing PMI edged down to 48.5 in May from 48.7, falling short of expectations and marking the lowest reading since November. This marks the third straight month of contraction, with underlying components still signaling broad-based weakness.

                  New orders and production remained in negative territory, at 47.6 and 45.4 respectively, suggesting that demand conditions are still under pressure. Employment also stayed weak at 46.8, contracting for a fourth straight month.

                  Prices Index slipped marginally to 69.4 from 69.8, but remains elevated. Over the last six months, price pressures have surged by over 19 points, bringing the index to its highest readings since mid-2022.

                  The external sector delivered particularly concerning signals, with new export orders plunging to 40.1, the lowest level since the pandemic and, excluding COVID-19, the weakest since the Great Recession. Imports also collapsed, down sharply to 39.9.

                  Despite the weak headline number, ISM noted that the PMI reading still corresponds to roughly +1.7% real GDP growth on an annualized basis.

                  Full US ISM manufacturing release here.

                  UK PMI manufacturing finalized at 46.4, with tentative signs of stabilization

                    UK manufacturing activity remained in contraction in May, with PMI finalized at 46.4, up modestly from April’s 45.4.

                    The data indicate that the sector continues to face “major challenges,” according to S&P Global’s Rob Dobson, citing turbulent domestic and global conditions, trade uncertainty, subdued client confidence, and increased wage costs tied to tax changes.

                    Still, there are early signs that the worst of the downturn may be easing. The indexes for output and new orders have risen for two consecutive months and were stronger than the initial flash estimates, hinting at possible stabilization.

                    However, Dobson warned that the sector could either steady or slip further depending on how trading conditions evolve in the coming months.

                    Full UK PMI manufacturing release here.

                    Eurozone PMI manufacturing finalized at 49.4, recovery progressing

                      Eurozone PMI manufacturing was finalized at 49.4 in May, up from April’s 49.0 and marking the highest level in 33 months.

                      Production increased across all four major economies: Germany, France, Italy, and Spain, supporting economist Cyrus de la Rubia’s view that the recovery is gaining traction.

                      De la Rubia also noted that output has now risen for three straight months, reinforcing the view that the recovery is gaining traction. Historical data suggests a 72% chance of another output increase next month.

                      Falling input costs, driven by lower energy prices, have enabled manufacturers to cut selling prices again, offering the ECB more flexibility for its expected interest rate cuts.

                      However, the outlook remains clouded by external risks, particularly the threat of higher US tariffs on EU goods. Any escalation in transatlantic trade tensions could quickly derail the fragile rebound.

                      Full Eurozone PMI manufacturing final release here.

                      Swiss GDP grew 0.5% in Q1, pharma exports surge on tariff frontloading

                        Switzerland’s GDP expanded by 0.5% qoq in Q1, beating market expectations of 0.4% qoq. When adjusted for the impact of major sporting events, GDP growth came in even stronger at 0.8% qoq. The State Secretariat for Economic Affairs noted that the services sector posted broad-based gains and domestic demand remained firm, contributing to the overall solid performance.

                        A standout was the chemical and pharmaceutical sector, which surged 7.5% in the quarter, driven by a sharp rise in pharmaceutical exports. This lifted overall manufacturing output by 2.1% and goods exports by 5.0%. Notably, exports to the US jumped significantly, suggesting possible front-loading in anticipation of evolving US trade policy.

                        Full Swiss GDP release here.

                        Japan’s PMI manufacturing finalized at 49.5, firms eye recovery despite trade headwinds

                          Japan’s PMI Manufacturing was finalized at 49.5 in May, up from April’s 48.7. S&P Global’s Annabel Fiddes noted that business conditions “moved closer to stabilisation,” as declines in sales eased and firms reported improved hiring activity.

                          Global trade tensions stemming from US tariffs continue to weigh on demand, with businesses citing “increased client hesitancy” and weaker orders.

                          Despite persistent external challenges around tariffs, sentiment around future output improved, and hiring rose at the fastest pace in over a year.

                          Full Japan PMI manufacturing final release here.

                          China’s NBS PMI Manufacturing edges higher to 49.5, second month of contraction

                            China’s official NBS PMI Manufacturing rose from 49.0 to 49.5 in May, signaling a modest improvement but still marking the second consecutive month of contraction.

                            The lift was driven by an acceleration in production and more optimistic business sentiment. The production sub-index climbed 0.9 pts to 50.7. New orders index increased from 49.2 to 49.8. New export orders also rebounded from a low base of 44.7 to 47.5, as some firms reported improved trade activity with the US.

                            Meanwhile, PMI Non-Manufacturing edged slightly lower from 50.4 to 50.3, lifting the PMI Composite to 50.4 from 50.2. Although still in expansion territory, the composite figure is consistent with the sluggish momentum seen over the past year.

                            Fed’s Waller: Temporary tariff effects could clear path for “good news” rate cut later this year

                              In a speech today, Fed Governor Christopher Waller struck signaled his support for “good news” rate cuts later this year, if inflation continues to ease and trade tensions don’t escalate significantly.

                              In his view, any inflation resulting from tariffs “will not be persistent” and he supports “looking through” these effects when considering policy decisions.

                              Waller added that the strong labor market and continued disinflation through April give the Fed time to assess the outcome of ongoing trade negotiations before making policy moves.

                              Should tariffs remain near his “lower scenario” and inflation continue its downward path toward 2%, Waller said he would support so-called “good news” rate cuts, easing driven by a stable economy rather than distress.

                              Full speech of Fed’s Waller here.

                              Canada GDP expands 0.1% mom in March, another 0.1% mom in April

                                Canada’s GDP grew by 0.1% mom in March, in line with market expectations. Strength in goods-producing industries continued to support overall output. The sector expanded by 0.2%, marking its second lead contribution in the past three months.

                                Services-producing industries also edged higher by 0.1%. In total, 9 out of 20 sectors posted growth.

                                Looking ahead, preliminary data from Statistics Canada suggests another 0.1% increase in real GDP for April.

                                Full Canada’s GDP release here.

                                US core PCE inflation cools to 2.5%, income surges

                                  US headline PCE price index rose 0.1% mom in April, in line with expectations, while annual inflation slipped from 2.3% yoy to 2.1% yoy, below the consensus of 2.2%.

                                  Core PCE, Fed’s preferred inflation gauge, also rose 0.1% mom and slowed from 2.6% yoy to 2.5% yoy, matching expectations. The data supports the view that disinflation remains intact, though the pace of moderation remains modest.

                                  At the same time, personal income data surprised to the upside, jumping 0.8% mom or USD 210.1B, well above the expected 0.3% mom. Personal spending rose a more modest 0.2% mom, matching forecasts.

                                  Full US personal income and outlays release here.

                                  ECB’s Panetta signals diminished room for further rate cuts

                                    Italian ECB Governing Council member Fabio Panetta said today that while the central bank has made meaningful progress in easing monetary policy, bringing the deposit rate down from 4% to 2.25%, “the room for further rate cuts has naturally diminished”.

                                    “However, the economic outlook remains weak, and trade tensions could lead to a deterioration,” he added. “It will be essential to maintain a pragmatic and flexible approach, considering liquidity conditions and the signals coming from financial and credit markets.”

                                    Panetta also highlighted the high-stakes nature of ongoing trade talks between the EU and the US, warning that even tensions are likely to have a “significant impact” on the region’s economy.

                                    BoE’s Taylor: Global headwinds justify lower monetary policy path

                                      BoE MPC member Alan Taylor reinforced his dovish position in an interview with the Financial Times, highlighting growing downside risks to the UK economy from global developments.

                                      Taylor, who alongside Swati Dhingra voted for a larger 50bps rate cut in May, argued that monetary policy should be on a “lower policy path” given the accumulating headwinds.

                                      He specifically pointed to impact of Trump’s tariffs on imports would “be building up over the rest of this year in terms of trade diversion and drag on growth”.

                                      While UK inflation unexpectedly jumped to 3.5% in April, Taylor downplayed the significance of the rise, attributing it to “one-time tax and administered price changes.”

                                      Swiss KOF rises to 98.5, but growth outlook remains subdued

                                        Switzerland’s KOF Economic Barometer edged up to 98.5 in May from 97.1, marking a modest improvement in economic sentiment. While the uptick is a positive signal, the barometer remains below its long-term average, suggesting that the broader outlook for the Swiss economy “remains subdued”.

                                        According to the KOF, the manufacturing sector showed notable strength, contributing to the overall improvement. However, indicators tied to foreign demand and private consumption remain under pressure, highlighting the ongoing drag from weak external conditions and cautious domestic spending.

                                        Full Swiss KOF release here.

                                        RBNZ’s Silk: Data to guide timing and need for further cuts

                                          RBNZ Assistant Governor Karen Silk said that interest rates are currently within the estimated neutral band of 2.5% to 3.5%.

                                          She noted that the full impact of previous easing has yet to filter through the economy, making any future adjustments highly dependent on incoming data.

                                          The OCR track indicates “whatever we do is going to be data-dependent, and then we will be looking to the data to help us to decide when or if we cut further from here,” she added.