Global economic activity continued to fall slightly short of market expectations last week. At minus 14, the Relative Performance Index shows forecasters still a little too optimistic about current conditions and, with recent inflation indicators typically surprising on the downside, should bolster expectations for interest rate cuts in 2024.

In the Eurozone, surprises in the economic data have been biased modestly to the downside since early October, leaving the region’s RPI at minus 9 and when excluding prices (RPI-P) at minus 19. However, with most forecasts already soft anyway, even mild underperformance can only boost the likelihood of steady policy at next month’s European Central Bank meeting.

In the UK, unexpectedly weak inflation and household spending helped to trim the RPI to minus 13 and the RPI-P to minus 6. Though the UK will likely avoid recession this year, current trends could well change come next quarter. Not good news for the government ahead of Wednesday’s Autumn Statement.

In Switzerland, the RPI (minus 3) and RPI-P (minus 5) remained close enough to zero to indicate an economy moving much as expected, which means sluggish growth and sub-2 percent inflation. Swiss National Bank policy still looks likely to be left hold in December.

In Japan, surprisingly weak third-quarter GDP did much to drag the RPI (minus 11) and RPI-P (minus 4) below zero. However, early tentative indications of a possible upside surprise in the current quarter left both measures just slightly negative. Even so, recession risks are building and could delay the Bank of Japan’s shift towards a less accommodative stance.

In China, a mixed bag of data was only enough to lift the RPI to minus 21 and the RPI-P to minus 40. Both measures leave the economy struggling to keep up with forecasts and help to explain the central bank’s highly generous liquidity injections. Reserve requirements and/or even official interest rates may yet be cut again.

Stronger-than-expected manufacturing sales as well as housing starts lifted Canada’s RPI to 26 yet with core inflation coming down to 3.2 percent the Bank of Canada may well, pending Tuesday’s CPI update, extend its steady policy path at next month’s meeting.

No action may also be likely at the Federal Reserve’s December meeting as this country’s data have been mostly running below expectations the past several weeks, ending last week at minus 18 overall and pulled down by lower-than-expected inflation results, evident by the RPI-P’s neutral score of minus 4.

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