According to data out today, the May CPI for China increased by 1.2% YOY and 1.5% MOM. Consumer inflation reached its lowest level for 4 months, allowing the central bank more room for further relaxation of monetary policy with a view to speed up the slowing economy. The numbers could convince the authorities to take more aggressive measures to stimulate the economy, in order to stave off a more wide scale fall of prices in the country.
At the same time the May Chinese PPI fell by 4.6% YOY and 4.6% MOM. This indicator fell short of market expectations. The PPI has been falling since March 2012 and it’s unlikely to restore itself in the near future. The Chinese central bank dropped its base rate in May for the third time in 6 months in an attempt to prop up the weakening economy.
The April balance of trade deficit in the UK dropped to the lowest it has been for a year. A negative though still remains: British firms have had weak data recently with regards to Eurozone exports. The difference in the cost of goods and services which the UK sells and purchases abroad for the month was 1.2 billion pounds. This is the lowest value since March 2014. It was expected that the deficit would be double. This reduction in the deficit can mostly put down to a significant decrease in imports: they reduced to levels unseen for the last four years. This, in turn, led to a reduction in the deficit to 8.6 billion pounds against March’s 10.7 billion pound deficit. Exports increased slightly.
At the same time, exports to the UK’s largest external market, the Eurozone, are still weak and as such are a warning sign for manufacturers. Recent surveys in the manufacturing sector have shown that enterprises have noticed the strong pound in relation to the euro and name it as one of the factors holding their goods exports back. This is due to British goods becoming more expensive on Eurozone markets. A reduction in the balance of trade deficit for the Q2 of 2015 is, in essence, a sign for an increase in demand from the strengthening Eurozone economies, despite all the negative factors, thus leading to an increase for British goods in the region.
Today some definitive Q1 Eurozone GDP was published. The aggregated quarterly GDP value of the 19 member states of the currency union increased by 0.4% YOY. The assessment of the growth in GDP for the final quarter of 2014 was reassessed from 0.3% to 0.4%. The negatives in regard to external trade were partially compensated by a quarterly growth by 0.6% in state expenditure, a value which stood at just 0.1% in Q4 of 2014. This means that the Eurozone isn’t concentrating too much budgets and their reduction anymore, as it had been doing for the last 5 years. Economic growth was also helped by increased investment expenditure which has been weak in the Eurozone for some time. Consumer expenditure also perked up a little.
It’s worth a mention that the market is awaiting the next session where the Fed will meet on the 16th and 17th June. Investors are expecting signals from the Americans about their monetary policy and as to when it will be tightened. Market response to the statistics coming out at the moment is very limited.
Cast a glance at the publication of the changes in oil reserves in the US according to data from API, it might come in handy.