UK PMI composite ticks up to 49.4, price pressures ease from April spike

    UK PMI Services rose modestly from 49.0 to 50.2, while Manufacturing PMI edged lower from 45.4 to 45.1. As a result, the Composite PMI ticked up from 48.5 to 49.4, still below the 50-mark that separates expansion from contraction.

    According to S&P Global’s Chris Williamson, business confidence has improved since April, helped in part by easing trade tensions. However, output across the private sector shrank for a second consecutive month, suggesting that the UK economy may be slipping into contraction for Q2.

    On a more encouraging note, inflationary pressures appear to have cooled significantly from April’s spike. This moderation in price growth, combined with lackluster output and emerging job losses, strengthens the case for further monetary easing by BoE in the coming months.

    Full UK PMI flash release here.

    German Ifo rises to 87.5, economy stabilizing with uncertainty eased

      Germany’s Ifo Business Climate Index rose to 87.5 in May, up from 86.9 in April, offering cautious optimism that the economy may be stabilizing.

      The improvement was driven by a notable rise in the Expectations Index, which climbed from 87.4 to 89.9, a sign that firms are growing more confident about future conditions. However, the Current Situation Index dipped slightly from 86.4 to 86.1.

      The Ifo Institute noted that “sentiment among German companies has improved” and that the recent surge in uncertainty has begun to ease.

      Full German Ifo release here.

      Eurozone PMI composite falls to 49.5, services falter, manufacturing holds tentatively

        Eurozone’s private sector returned to contraction in May, with PMI Composite falling from 50.4 to 49.5, a six-month low. The drag came from the services sector, where the PMI dropped from 50.1 to 48.9, its weakest reading in 16 months. While the manufacturing index rose modestly from 49.0 to 49.4, marking a 33-month high, it remained in contractionary territory.

        According to HCOB Chief Economist Cyrus de la Rubia, the region’s economy “cannot seem to find its footing,” as growth signals remain elusive and sentiment subdued.

        The modest improvement in manufacturing may reflect front-loaded activity as firms seek to get ahead of US tariffs, rather than underlying demand strength. However, the downturn in services, typically more domestically oriented and less exposed to global trade, raises concern about internal demand softness.

        For the ECB, the numbers are “likely to leave it with mixed feelings”. While service sector inflation appears to be moderating, input costs — likely driven by wages — are ticking higher again. Manufacturing purchase prices, by contrast, continue to fall.

        Full Eurozone PMI flash release here.

        BoJ’s Noguchi: Must tread carefully with step-by-step policy normalization

          BoJ board member Asahi Noguchi emphasized the importance of a “measured, step-by-step” pace in raising interest rates, stressing the need to carefully assess the economic impact of each hike before proceeding further.

          Noguchi also addressed the upcoming interim review of BoJ’s bond tapering strategy, indicating that he sees no need for any major adjustments to the current plan, which runs through March 2026.

          He noted that the central bank should approach its long-term reduction in the balance sheet with flexibility, taking the time needed to ensure stability while maintaining the capacity to respond to “sudden market swings”.

          Any emergency increase in bond purchases, he noted, would be strictly conditional and “only be implemented during times of severe market disruption.”

          Japan’s PMI composite falls to 49.8, private sector contracts again

            Japan’s private sector activity fell back into contraction in May, with PMI Composite declining from 51.2 to 49.8. Manufacturing output edged higher from 48.7 to 49.0, but remained below the neutral 50 mark. The services sector, however, lost more momentum, with its PMI falling from 52.4 to 50.8.

            The decline in composite output reflects weakening domestic and external demand, as new business volumes fell for the first time in nearly a year.

            S&P Global’s Annabel Fiddes noted that elevated uncertainty around trade policy and foreign demand weighed heavily on business confidence, which sank to its second-lowest level since the pandemic’s onset.

            Full Japan PMI flash release here.

            Australia’s PMI Composite slips to 50.6; firms cite election drag on demand

              Australia’s private sector showed signs of slowing in May, with PMI Composite falling from 51.0 to a 3-month low of 50.6. Manufacturing index held steady at 51.7. But services weakened from 51.0 to 50.5, its lowest level in six months.

              According to S&P Global’s Andrew Harker, the sluggishness may be tied in part to election-related uncertainty, which “contributed to slower growth of new orders”. Still, firms remained cautiously optimistic, continuing to hire at a “solid pace”. With the political noise expected to ease, attention will turn to whether demand picks up in the months ahead.

              Full Australia PMI flash release here.

              UK CPI surges to 3.5% in April, core jumps to 3.8%

                UK inflation came in hotter than expected in April, with headline CPI rising 1.2% mom versus expectation f 1.1% mom. Annual CPI accelerated from 2.6% yoy to 3.5% yoy, above the 3% mark for the first time since March 2024.

                Core CPI, which strips out energy, food, alcohol and tobacco, climbed sharply from 3.4% yoy to 3.8% yoy, its highest level since April 2024.

                Breakdowns show a sharp jump in both goods and services inflation. Goods inflation accelerated from 0.6% yoy to 1.7% yoy, while services inflation climbed from 4.7% yoy to 5.4% yoy , highlighting the strength of domestic price pressures.

                Full UK CPI release here.

                Australia’s leading index falls to 0.2%, growth pulse fades

                  Australia’s Westpac Leading Index slowed from 0.5% to 0.2% in April, signaling a loss in growth momentum.

                  According to Westpac, the above-trend growth seen earlier this year has “all but disappeared,” primarily due to rising global trade uncertainty and weaker commodity prices.

                  While these external pressures dominate, domestic factors such as a slowing labor market and only modest support from interest rate cuts are also contributing to the loss of momentum.

                  The overall picture suggests a stalling in the already tepid recovery, with GDP growth expected to reach just 1.9% by the end of 2025, well below historical averages.

                  Following RBA’s recent 25bps rate cut to 3.85%, Westpac expects a cautious pause at the next policy meeting on July 7–8. The central bank is likely to await further clarity from the Q2 inflation data due at the end of July before considering additional easing.

                  Full Australia Westpac leading index release here.

                  Japan’s US-bound exports fall -1.8% yoy as tariffs and strong Yen Bite

                    .Japan’s export growth slowed to just 2.0% yoy in April, marking the weakest pace since October 2024.

                    Notably, shipments to the US fell -1.8% yoy — the first decline in four months — as demand for automobiles, steel, and ships weakened. Exports of automobiles alone dropped -4.8% yoy by value, impacted by a stronger Yen and reduced demand for high-end models.

                    The decline coincides with the imposition of 25% US tariffs on Japanese auto, steel, and aluminum exports, alongside the 10% blanket levy applied to most trade partners under the current US trade regime.

                    Trade with Asia remained more resilient, with exports rising 6.0% yoy. However, shipments to China dipped -0.6% yoy.

                    On the import side, Japan saw a -2.2% yoy contraction, resulting in a trade deficit of JPY -115.8B.

                    Seasonally adjusted figures show a -2.7% mom drop in exports and a -1.4% mom drop in imports, with the adjusted trade deficit widening to JPY -409B.

                    Fed’s Bostic: Tariff impact to surface as front-running shielding fades

                      Atlanta Fed President Raphael Bostic warned that the economic effects of recent tariffs may be set to emerge more visibly, as businesses begin to exhaust their earlier stockpiling and “front-running” strategies.

                      Speaking on the sidelines of a conference, Bostic said that “a lot of the tariff impact to date has actually not shown up in the numbers yet,” but the strategies used to insulate against cost shocks — such as building up inventories — “are starting to run their course.”

                      As these buffers fade, Bostic expects that changes in prices could follow soon, offering a clearer view of how tariffs will impact both inflation and consumer behavior. “We’re about to see some changes in prices, and then we’re going to learn how consumers are going to respond to that,” he noted.

                      Given the heightened uncertainty, Bostic maintained a cautious tone on policy. “We should wait and see where the economy is going before we do anything definitive,” he said.

                      Fed’s Musalem warns tariffs still a threat despite US-China truce

                        St. Louis Fed President Alberto Musalem cautioned that even with the 90-day trade truce between the US and China, the current level of tariffs could still have “significant” short-term effects on the economy.

                        In a speech overnight, he warned that tariffs are likely to “dampen economic activity” and further weaken the labor market. At the same time, tariffs could raise inflation both directly, through higher import prices, and indirectly, by triggering broader cost increases in domestic goods and services.

                        Musalem outlined two potential monetary policy responses depending on how persistent the inflationary effects of tariffs prove to be.

                        If the price impacts are temporary and inflation remains controlled, then it may be appropriate for the Fed to “look through” the short-term inflation spike and consider easing policy to cushion the labor market.

                        However, if inflation proves stickier and starts to unanchor long-term expectations, Musalem argued that restoring price stability should take precedence, even at the cost of weaker growth and higher unemployment.

                        “History tells us that restoring price stability is more costly for the public… if inflation expectations are not well anchored,” Musalem said.

                        Canada’s headline CPI slows to 1.7% on energy, but core measures jump

                          Canada’s headline consumer inflation eased to 1.7% yoy in April, down from 2.3% yoy in March, slightly above the expected 1.6% yoy. The deceleration was primarily due to a steep drop in energy prices by -12.7% yoy, with gasoline down -18.1% yoy and natural gas falling -14.1% yoy. On a monthly basis, overall CPI declined by -0.1% mom.

                          However, the details beneath the surface were less comforting for policymakers. Excluding energy, inflation actually accelerated, with CPI rising 2.9% yoy compared to 2.5% yoy in March.

                          Moreover, all three core inflation measures rose notably. CPI-median rose from 2.9% yoy to 3.2%, above expectation of 2.9% yoy. CPI trimmed rose from 2.8% yoy to 3.1% yoy, above expectation of 2.8% yoy. CPI common jumped from 2.3% yoy to 2.5% yoy, above expectation of 2.3% yoy.

                          Full Canada CPI release here.

                          ECB’s Knot: June rate cut possible, but not confirmed

                            Dutch ECB Governing Council member Klaas Knot said today that a rate cut at the June meeting remains on the table but is far from a done deal.

                            “I can’t exclude we will decide to have another rate cut in June, but I also can’t confirm it,” he told reporters, emphasizing that ECB must remain focused on medium- to long-term inflation risks rather than short-term fluctuations.

                            Knot said the new staff projections next month will incorporate scenarios reflecting the impact of recent US trade policies and potential EU countermeasures.

                            While the outlook may show lower inflation in 2025 and 2026, the bigger concern lies beyond that window, given the longer-term effects of tariff-related distortions. “It is more interesting to see what happens after that period,” he noted.

                            BoE’s Pill: Quarterly rate cuts may be too rapid given increasing intrinsic inflation persistence

                              BoE Chief Economist Huw Pill explained his vote to keep the Bank Rate unchanged at the May MPC meeting as a “skip” rather than a pause in the broader easing cycle.

                              In speech today, Pill said that while disinflation remains on track, the pace of quarterly 25bps cuts since last summer may be ” too rapid” given current inflation dynamics.

                              He expressed particular concern that structural changes in wage and price-setting behavior have heightened the “intrinsic persistence” of inflation in the UK.

                              As a result, Pill argued that a more cautious approach to monetary easing is warranted, reinforcing the need to slow the pace of rate reductions while continuing the broader policy normalization.

                              Full speech of BoE’s Pill here.

                              ECB’s Schnabel: Disinflation on track, steady hand needed amid new shocks

                                ECB Executive Board member Isabel Schnabel said the Eurozone’s disinflation process remains on track, but “new shocks” — particularly from trade tariffs — are presenting emerging risks.

                                While tariffs may dampen inflation in the short term, Schnabel warned they pose medium-term upside risks, warranting a “steady hand” in monetary policy.

                                She emphasized the importance of not overlooking “supply-side shocks” if they appear persistent, as doing so could risk “de-anchoring inflation expectations”.

                                Schnabel also highlighted the Eurozone’s relative resilience following the tariff escalation on April 2, noting Euro’s appreciation and a shift in perception toward the region as a “safe haven.” She characterized this as a “historical opportunity” to strengthen the international role of Euro.

                                RBA’s Bullock: Debated 25 vs 50bps cut debated; trade risks tilt toward disinflation

                                  Following RBA’s decision to cut the cash rate by 25bps to 3.85%, Governor Michele Bullock revealed in the post-meeting press conference that the Board briefly considered holding rates but quickly moved to debate between 25 and 50 basis point reductions.

                                  Ultimately, the more measured 25bps cut was preferred, given that inflation is within target and unemployment remains resilient. Bullock emphasized that while easing was justified, “it doesn’t rule out that we might need to take action in the future.”

                                  Bullock also noted that the Board views recent global trade developments as broadly “disinflationary” for Australia. However, she cautioned that risks remain tilted both ways.

                                  “There is a risk to inflation on the upside, trade policies could lead to supply chain issues, which could raise prices for some imports, much as we saw during the pandemic,” she emphasized.

                                  RBA cuts rates to 3.85%, lowers 2025 growth and inflation forecasts

                                    RBA delivered a widely expected 25 bps rate cut, lowering the cash rate to 3.85%. In its statement, RBA said the risks to inflation had become “more balanced,” with headline inflation now within the target range and upside pressures “appear to have diminished” amid deteriorating global economic conditions.

                                    Still, the central bank remains cautious, citing significant uncertainty around both demand and supply dynamics, as well as the evolving impact of global trade tensions and geopolitical developments.

                                    The Board acknowledged a “severe downside scenario” and emphasized that monetary policy is “well placed” to respond decisively if global shocks materially affect Australia’s outlook. RBA flagged the unpredictability of global tariff policies and noted that households and businesses may hold back on spending amid heightened uncertainty. These concerns have contributed to a weaker outlook across growth, employment, and inflation.

                                    In its revised forecasts, RBA downgraded GDP growth for 2025 to 1.9% (from 2.1%) and for 2026 to 2.2% (from 2.3%). End-2025 headline CPI was revised down to 3.0% from 3.7%, with end-2026 projection lifted from 2.8% to 2.9%. Trimmed mean forecasts for the end-2025 and end 2026 were both cut slightly from 2.7% to 2.6%.

                                    Full RBA statement and SoMP.

                                    China cuts loan prime rates for first time in seven months

                                      China’s central bank lowered its key lending benchmarks for the first time since October, delivering a long-anticipated move to support the economy.

                                      PBoC lowered the one-year loan prime rate by 10 bps to 3.0%. The five-year LPR, a key reference for mortgages, was also trimmed by 10 bps to 3.5%.

                                      The October 2025 easing was more aggressive at 25 basis points, but today’s cuts still mark a meaningful step in the ongoing monetary support cycle.

                                      The move comes as part of a broader policy package unveiled by PBOC Governor Pan Gongsheng and top financial regulators ahead of high-level trade talks in Geneva that have since led to a temporary truce between China and the US on tariffs.

                                      BoE’s Dhingra: Vote for bigger rate cut a signal of economic direction

                                        BoE MPC member Swati Dhingra explained her decision to vote for a larger 50bps rate cut at the May 8 meeting as a deliberate signal about the UK’s economic outlook.

                                        Speaking in an FT interview, Dhingra said she wanted to send a “more categorical statement about where I think the economy is headed,” noting that using such a larger move sparingly increases its impact on market expectations.

                                        Her vote, along with Alan Taylor’s, diverged from the majority who supported a more measured 25bps cut.

                                        SNB’s Schlegel: Inflation outlook unclear, negative rates remain on the table

                                          SNB Chair Martin Schlegel warned that the outlook for Swiss inflation remains highly uncertain and reiterated that the central bank could not rule out a return to negative interest rates.

                                          Speaking at an event overnight, Schlegel said while such rates were an extraordinary measure, they had previously achieved their intended effect when used between 2014 and 2022.

                                          “The uncertainty is currently enormous,” Schlegel said, citing volatility in both USD/CHF and EUR/CHF, adding that “investors are seeking a safe haven in stormy times,” which has put upward pressure on the Swiss franc.

                                          Separately, Schlegel addressed concerns about global asset shifts, emphasizing that US treasuries remain foundational to global markets despite rising uncertainty. “There’s no current or foreseeable alternative to U.S. treasuries,” he said, citing their liquidity and dominance.