Global activity experiences a synchronized slowdown

0

Craig Stirling, Bloomberg

May 22, 2022, 7:20 p.m.

Last modification: May 22, 2022, 7:42 PM

Photographer: Victor J. Blue/Bloomberg

“>

Photographer: Victor J. Blue/Bloomberg

  • Economists see drops in all 15 expected PMI gauges in the US and Europe
  • Rate hikes expected in New Zealand and South Korea

Days after global finance chiefs described the widespread economic fallout inflicted by Russia’s war in Ukraine, business surveys could show an increasingly synchronized downturn.

That’s the impression likely to be on Tuesday – three months after the dispute erupted – as the purchasing managers’ indices for May are released within hours by the world’s major economies.

Surveys by economists of the likely results of 15 indicator gauges in the United States and across Europe predict a decline in each.

the indexalso released for major Asian economies, will offer a business-focused perspective on how the inflationary shock caused by the conflict in Ukraine fits with the pandemic’s legacy of supply shortages and the slowdown of persistent lockdowns coronaviruses in China.

The worry that what might follow is stagflation – a noxious mix of soaring prices, stalled growth and rising unemployment – has infected financial markets over the past week and dominated an already tense meeting of Group of Seven finance ministers.

“Russia’s war of aggression is causing global economic disruption, affecting the security of global energy supplies, food production and exports of food and agricultural products, and the functioning of global supply chains in general” , the G-7 ministers said in a statement. communicated after their gathering in Germany.

Global corporations are likely to echo that lament as executives mingle with political leaders and central bankers in the Swiss mountain resort of Davos for the World Economic Forum from Sunday.

Elsewhere, the release of the US Federal Reserve’s preferred price gauge, likely interest rate hikes in New Zealand and South Korea, and the aftermath of Saturday’s election in Australia – which saw the coalition Prime Minister Scott Morrison’s Conservative vote — are likely to attract investors’ attention.

American economy

In the US, the headline report for the coming week will be the April income and spending release, which also includes the Fed’s favorite inflation gauge.

While the price index for personal consumption expenditures excluding food and energy should decline from one year to the next, the median forecast calls for a third consecutive monthly increase of 0.3%.

Such a pace explains why Fed Chairman Jerome Powell announced half-percentage-point hikes at central bank policy meetings in June and July.

Wednesday’s release of the minutes of the Federal Open Market Committee’s May deliberations may shed more light on what has become a more aggressive policy response to elevated price pressures.

Powell will also deliver what are billed as “opening remarks” via pre-recorded video at 12:20 p.m. Washington time on Tuesday at an economics conference in Las Vegas. He will not take questions after his appearance, according to the Fed’s weekly schedule.

Among other data available, Friday’s income and expenditure report is expected to show that demand remained strong at the start of the second quarter despite high inflation.

The government will also release figures on April durable goods orders and new home sales. The preliminary S&P Global manufacturing and services indices for May are due out on Tuesday.

Asia

In Australia, the lowest unemployment rate since the 1970s was not enough to save Morrison’s job in Saturday’s national vote. Labor leader Anthony Albanese, who is set to take power, has called for policy changes to tackle sluggish wage growth and rising inflation.

US President Joe Biden, seeking support for his Indo-Pacific economic framework, met with new South Korean President Yoon Suk Yeol on Saturday in Seoul and began talks with Japanese Prime Minister Fumio Kishida in Tokyo on Monday. .

Kishida plans to announce its intention to increase the defense spending when he meets Biden, reflecting the prime minister’s wish to strengthen the U.S.-Japan alliance to deter China’s influence in the region, according to the Yomiuri newspaper.

The Reserve Bank of New Zealand and the Bank of Korea are both meeting to decide policy, with rate hike leaders expected to push borrowing costs up again.

Indonesia’s central bank is also meeting, although a majority of economists expect it to put interest rate hikes on hold for the time being.

South Korean export figures will indicate how global trade is holding up in May amid disruption from China’s lockdowns. Inflation figures from Tokyo at the end of the week will show how the price trend is developing in the capital in May.

Europe, Middle East, Africa

In Europe, Germany’s Ifo business climate indicator for May, due Monday, is expected to show a decline from the previous month, presaging purchasing managers’ indices the following day. The week will be punctuated by a public holiday Thursday in the main countries of the euro zone.

Several policymakers are likely to steal the show at a time when the global squeeze on the cost of living turns into a collective concern about stagflation.

Bank of England Governor Andrew Bailey, who recently warned of a “doomsday” global risk from soaring food prices, will speak alongside Bundesbank chief Joachim Nagel on Monday. during a conference organized by the governor of the Austrian central bank, Robert Holzmann.

Among multiple other appearances from the European Central Bank will be that of President Christine Lagarde, who is due to speak in Davos on Wednesday.

Financial stability reports from Sweden’s Riksbank on Tuesday and the ECB on Wednesday will also be of interest the week after market volatility caught the attention of G-7 ministers.

The Bank of Israel is expected to raise rates by at least 25 basis points on Monday, continuing a hike cycle that began in April in the face of rising inflation.

Turkey’s central bank is likely to keep rates unchanged for the fifth consecutive month on Thursday, even as annual consumer inflation hits 70% for the first time since the 2000s.

In Ghana, policymakers are seen rising on Monday to rein in inflation which hit an 18-year high of 23.6%, more than double the upper end of a target range. For Nigeria, it is likely a pause on Tuesday awaiting a stronger economic outlook.

Latin America

Look for Peru’s first-quarter output data on Monday to show growth rebounded despite headwinds from inflation, rising interest rates and ongoing political unrest.

Inflation reports from the region’s two largest economies could deliver some long-awaited good news for their respective central bankers: Mexico is set to post a negative biweekly figure, while Brazil’s monthly reading could hit a low of 12 months.

Policymakers at both banks were initially slow to react to the dramatic spike in consumer prices that began in 2020, but economists now see inflation peaking for both, finally, in the second quarter.

Later Tuesday, Chile’s central bank releases its retailer survey, while data on mall and supermarket sales are available in Argentina.

Brazil’s ongoing central staff strike may continue to contain a series of data, but Mexico will release trade, current account, retail sales, first quarter final production and minutes of the 12 meeting. May from Banxico.

The bank’s eighth straight hike raised its benchmark rate to 7%, and most analysts expect a further 150 basis point tightening – although some as much as 250 basis points. Typically around 15,000 words, Banxico’s minutes always give investors and analysts food for thought.

— With help from Vince Golle, Alister Bull, Sylvia Westall, Malcolm Scott and Zoe Schneeweiss

Warning: This article first appeared on Bloombergand is published by special syndication agreement.

Share.

Comments are closed.