The Relative Performance Index, at a global reading of minus 24, has slipped further into negative surprise territory, boosting expectations in financial markets that it is just a matter of time before most major central banks begin to cut key interest rates.

In the Eurozone, signs of recession are building with the RPI at minus 10 and when excluding prices (RPI-P) at minus 14. These readings have been below zero most of the time since early October, suggesting the downswing could be slightly steeper than currently anticipated. Recent data strengthen the hand of the ECB’s doves ahead of December’s meeting.

In the UK, a surprisingly firm September economy boosted the RPI (17) and the RPI-P (12) back above zero for the first time in a month. However, with third quarter growth only non-negative due to net foreign trade, forecasters will still expect the next move in Bank Rate to be down.

In Switzerland, overall economic activity continues to lag expectations, albeit by less than in most earlier months. At minus 14, the RPI indicates a modest degree of underperformance, mainly reflecting surprisingly soft inflation. At minus 5, the RPI-P shows the real economy behaving much as forecast.

In Japan, the RPI (32) and RPI-P (15) remain in positive surprise territory, supporting the Bank of Japan’s decision late last month to tweak its yield curve control policy. In complete contrast, at minus 100, the Chinese RPI-P underlines the need for the latest government fiscal stimulus and increases the chances of there being more measures to come. However, recent positive inflation surprises make for a somewhat less weak RPI (minus 64) and have eased at least some of the pressure on the national central bank to cut interest rates again.

Flat results from the US and Canada, which had been strong performers in prior months, are also behind the downturn in the global measure. The RPI and RPI-P for the US are at minus 14 each and point to slight underperformance. At minus 9 and plus 6, Canada’s scores are within the consensus range to indicate that this country’s data are coming in as expected. Citing a dimmer business outlook and gradually easing prices, the Bank of Canada kept policy on hold at its October meeting. The BoC next meets in early December.

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