Chart pack and analysis attached.
Eurozone putting together some better credit figures in April (once adjusting for sales and securitisations) amid strong growth in non-financial corporate borrowing in Germany and consistently strong credit demand (at both a corporate and consumer level) in France. This growth has more than offset ongoing weakness in Italy, where NFC lending continues to contract rapidly.
While there was some deceleration in retail sales growth m/m in April the numbers still bettered consensus and looking at the y/y rates activity still looks solid. We’ve actually been in this growth range (4-6% ann. value) for pretty much the entire Brexit period, while volumes have increased more recently, after the initial hit from post-referendum inflation.
While the headline rate pushed up and there was a move higher in services, core inflationary pressures looked relatively stable in April. Future pressures look equally contained, in part reflected in steady PPI output prices. Sterling has been weakening but the rate of decline has, thus far, has been fairly measured
Chart pack and analysis attached.
First quarter real Japanese GDP registered a surprise expansion. But digging below the surface and there isn’t that much to get excited about. Underlying demand remains weak both in terms of household spending and government. It was left to net exports – where imports declined at a faster rate than weak exports – and a further and faster inventory build to provide the statistical boost.
Eurozone April inflation matched the increase the market was expecting, notably core which now stands at its highest level in 43 months. But this really flatters the overall picture given the increase in package holiday prices (notably in Germany) which lifted the recreation component of core this month, alongside an overall uptick in corresponding services.
Currency markets have been fairly tame over the past week. The yen has gained some further ground following its recent…
A weak industrial production number and even bleaker manufacturing figures, which leave the y/y rate in negative territory for the first time since December 2016 (and the last China crisis!) On the manufacturing side non-durables look weak while autos within the durables continue to drag with auto production running around -4.4% y/y now, maintain the negative streak from the start of the year.
Retails sales report again providing some volatility with sales weakening following the very strong March rebound. But the overall picture is still not that bad. The y/y rate might have dipped a little but we’re still clear of the low we touched in December. The trend since then is still easy to label as ‘recovering’.
The improvement we saw in the headline activity numbers in March proved short lived with both industrial production and retail sales taking a renewed dive in April. Auto sector weakness was notably pronounced. Passenger car unit sales are down some 11% from the June 2018 peak, which is unprecedented in a developing economy with a reported growth rate as that of China.
Modest downside surprise on both headline and core but not really anything material. Underlying inflationary pressure remains well contained with the recent rebound driven largely by shelter. Ex-ing that out and inflationary pressures look even more contained.
March output data was strong on the manufacturing side, amid inventory building ahead of the (since extended) end-March Brexit deadline. Construction and services ended the quarter on a weak note, leading to an overall dip in GDP in the final month of Q1.
Underlying money supply growth remains weak, reflected in M2’s shrinking share relative to GDP. But the credit multipliers do look better, with some upward momentum suggesting that efforts to spur lending have been working, and the right type of lending as seen by the ongoing contraction of borrowing from the shadow banking sectors.
This morning completed the March industrial production and orders reports for Germany. Although the m/m bounce in industrial production extended, the prior month’s downward revision took some of the gloss off this and the y/y comparison still looks gloomy.
Now the Chinese New Year effects have washed through we’re getting a cleaner picture of what underlying trade growth in China looks like. While the April figures disappointed, exports back in negative territory y/y, over the first four months of the year as a whole the export figures are still marginally ahead of where they were in 2018, while imports are down around 2.5%.
Dollar holding below its recent highs but still looks like a corrective consolidation framed in a longer-term uptrend. That applies to most of the crosses, with perhaps the exception of the yen. Equities have rolled over with the most pronounced break being in Europe.
A very strong Q1 non-farm productivity report, partly flattered by a surprisingly soft unit labour costs number. Obviously, GDP growth has been strong, and with employment growth running at a consistent weight the implication is that productivity had to have accelerated. But there are some other distortions within the mix.
The US April manufacturing PMIs are all now in following today’s ISM release and the picture looks pretty bleak with a big slide from what had looked to be a healthier March release. There was a notable deteriorating in the orders side with export orders sub 50.0 for the first time since the 2015/16 China slowdown.
