Global economic data are, on net, coming in below consensus forecasts, at minus 13 on Econoday’s Relative Performance Index (RPI), down nearly 30 points from the prior week to indicate that global interest rates may well have peaked. Accounting for much of the downdraft was the US with this country’s RPI at minus 19 for the lowest reading since August. Continued underperformance would firm expectations for another pause at the Federal Reserve’s December meeting.
Canadian data, which had been outperforming much of the year, are now coming in close to consensus estimates, at minus 5 on the RPI and reflecting not only flat and as-expected GDP growth but also October’s employment report where the unemployment rate rose 2 tenths to 5.7 percent. There’s still one more jobs report to go before the Bank of Canada’s next meeting in early December but another pass by the bank would be consistent with the RPI.
In the Eurozone, the RPI at minus 18 and at minus 16 less prices (RPI-P) remained in the red and the negative skew to readings since mid-August was borne out in surprise contraction in third quarter GDP. With inflation also undershooting forecasts, the next move in ECB interest rates looks all the more likely to be down.
The recent sub-par performance in the UK continued, leaving the RPI at minus 16 and the RPI-P at minus 27. Indeed, disappointing data forced a downward revision to the BoE’s growth forecast on Thursday and helped to ensure another split vote to leave Bank Rate at 5.25 percent.
In Switzerland, the RPI at minus 14 ended the week on a familiarly soft note but largely due to the unexpected softness of consumer prices (at an annual 1.7 percent). The RPI-P of minus 5 remains close enough zero to indicate real economic activity is broadly matching market expectations. The Swiss National Bank is still toeing a hawkish line but recent data suggest no change in its policy rate next month.
In Japan, a mixed bag of data was firm enough to leave both the RPI (18) and RPI-P (6) above zero but not to the extent that would imply significant outperformance. As such, current readings are supportive of what proved to be only a mild tightening of BoJ policy on Monday.
In China, PMI indications of an unexpectedly sluggish economy in October pushed the RPI and RPI-P back into negative surprise territory at minus 14 for each. Recent data have been volatile but in the main on the soft side of forecasts, sustaining pressure on the authorities to boost economic activity in order to achieve the official 5 percent full year growth forecast.