At minus 14 and minus 9, both the Relative Performance Index and the index less prices (RPI-P) extended the prior week’s pattern of global underperformance, too limited, however, to sway expectations for monetary policy.
In the Eurozone, the RPI (minus 13) and RPI-P (minus 12) remained in negative surprise territory. Economic activity looks to be recovering from earlier aggressive ECB tightening but momentum has recently slipped behind forecasts. Accordingly, an ECB interest rate cut in June remains very likely although that could still change should Tuesday’s flash inflation report for April prove surprisingly strong.
Recent UK data, though mixed, have left the economy on course to leave recession behind in the first quarter and further reduced the chances of a cut in Bank Rate as soon as the BoE’s next meeting on May 9. However, on balance, economic activity in general still disappointed and left both the RPI (minus 15) and RPI-P (minus 30) sub-zero for the first time since late-March.
In Japan, the Bank of Japan concluded with no change in interest rates, in line with market expectations and a prolonged period of generally negative surprises in the economic data. Still, the week ended with both the RPI (15) and in particular the RPI-P (66) above zero, potentially pointing to a stronger second quarter. There were no major indicators released in China, leaving this country’s RPI (minus 34) and RPI-P (minus 27) showing economic activity clearly underperforming.
In Canada, surprisingly soft retail sales kept both the RPI (minus 17) and RPI-P (minus 11) sub-zero and so support speculation that the Bank of Canada will lower its benchmark interest rate ahead of the Federal Reserve.
Economic activity in the US is coming in very near expectations, at minus 2 on the RPI and minus 6 on the RPI-P. However welcome steady strength in the labor market and consumer demand have been, lack of progress on inflation keeps pushing back expectations for a Federal Reserve rate cut.