Global economic data on net are coming in within consensus forecasts and near the breakeven zero-line for the Relative Performance Index (RPI), at minus 7 overall and minus 8 when excluding prices (RPI-P) to indicate only a marginal degree of underperformance.

A surprising, and possibly spurious, year-end bounce in industrial production was largely responsible for lifting the Eurozone RPI to 8 and the RPI-P to 21. Real economic activity in general is running slightly ahead of market expectations but, more importantly for the European Central Bank, recent inflation data have surprised on the downside. Disagreements over policy on the ECB’s Governing Council are becoming more heated.

In Switzerland, fresh downside surprises in the January inflation reports together with unexpectedly soft consumer sentiment reduced the RPI to minus 32 and the RPI-P to minus 15. Recent developments in prices and the real economy mean that the Swiss National Bank remains a leading contender to be the first among the major central banks to cut policy rates.

In the UK, the onset of recession came as no surprise. Indeed, although the fourth quarter contraction in GDP was slightly steeper than anticipated, the monthly December data together with January retail sales easily beat expectations. Still, with inflation undershooting forecasts, a mixed bag of data put the RPI and RPI-P at 7 and 33 respectively. A cut in Bank Rate in March remains unlikely.

By contrast, Japan’s slide into recession was wholly unexpected and helped to lower both the RPI and RPI to minus 40, their weakest prints since last September. The fall in both indices dampened Bank of Japan tightening speculation, adding to the yen’s problems as the dollar rose above the 150 level. In turn this has raised the possibility of fresh BoJ intervention in the currency markets.

In Canada, disappointingly soft reports on housing and manufacturing nudged the RPI and RPI-P back below zero. However, at minus 12, both measures show recent economic activity in general performing only slightly weaker than forecast and a rate cut by the Bank of Canada before the second quarter still looks improbable.

US data, which had been slightly outperforming, are now coming in as forecast, at minus 2 overall and plus 6 less prices. These readings imply no near-term change for Federal Reserve policy.

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