Global data continue to exceed forecasts at 21 on the Relative Performance Index (RPI) and 26 less prices (RPI-P) to indicate tangible outperformance especially for the real economy. These results are a bit firmer than the prior week’s respective RPI and RPI-P scores of 16 and 21.
China is now the center of the RPI’s strength, at 79 overall and 75 for the RPI-P. There has been some speculation that the People’s Bank of China is considering introducing quantitative easing to stimulate demand but on current trends it might not be needed.
Canada also continues to exceed forecasts though March’s disappointing employment report pulled the RPI lower to 8, down from the prior week’s 23 though when excluding what have been soft inflation data, the RPI-P rises to 26. With inflation undershooting expectations and employment data softening, a rate cut by Bank of Canada may be in play.
However much the US employment beat forecasts, the rolling off of even stronger prior results finds this country’s RPI and RPI-P both at minus 4, very near the zero line to indicate that recent US data are coming within Econoday’s forecast ranges. Nevertheless, the unrelenting strength of the US labor market is not building the case for rate cuts.
In the Eurozone, another downside surprise on inflation in March helped to trim the RPI to minus 8 and underpinned speculation about a cut in the ECB’s key interest rates in June. However, the unexpected weakness of prices is not mirrored in the real economy for which an RPI-P of 11 indicates a degree of outperformance. As such, the chances of the central bank lowering benchmark rates at Thursday’s meeting very low.
Similarly in the UK a mixed batch of data leaves the RPI (minus 4) just in negative surprise territory but the RPI-P (15) showing real economic activity running slightly ahead of forecasts. Overall, the latest readings leave open the door to a cut in Bank Rate but add no extra pressure for a move before June.
In Switzerland, surprisingly weak March inflation data helped to ensure that the recent period of modest economic outperformance was very short-lived. At minus 29 and minus 15 respectively, both the RPI and the RPI-P show activity once again falling quite well short of forecasts, in turn feeding speculation about another cut in the SNB’s policy rate later this quarter.
In Japan, the RPI (minus 7) and RPI-P (minus 5) are just in negative surprise territory. Both gauges have been mainly sub-zero since late January, arguing against any aggressive Bank of Japan tightening and, to the concern of the authorities, adding to downside pressure on the yen. With USD/JPY testing the 152 level, there is a growing chance of renewed intervention.
