Your week ahead (10 June): China publishes monthly activity data, and the UK releases jobs report

Octo Members
10 June 2019

A longer read.

The big economics events mapped out to help you plan your working week, from Silvia Dall’Angelo, senior economist at Hermes Investment Management.


China’s money and lending data will be released early this week. In April, M2 money supply growth eased modestly to 8.5% year-on-year.

Consensus forecasts suggest that it will stabilise at 8.6% in May. The Total Social Financing (TSF) increased significantly by 8.2tn yuan in Q1. It normalised in April, rising by 1.36tn yuan, and consensus expectations point to a similar reading (1.4tn yuan) in May. Over the year, TSF growth will probably hold above 10%.

Meanwhile, China will also publish its trade report for May. In April, it showed some payback in export growth and a recovery in import growth. Consensus forecasts suggest that the picture for trade will be subdued in May: export growth is expected to decline to -3.8% year-on-year from -2.7% in the previous month, while import growth is likely to fall to -3.3% year-on-year from 4% in April. Going forward, the recent tariff re-escalation implies downward pressures on China’s trade sector.

In Japan, the finance ministry will publish its trade data for April, while the Cabinet Office will release the Eco Watchers Survey, which closely watches region-by-region economic trends, for May.

In the UK, investors will focus on the monthly GDP and activity data. In Q1, the UK economy grew by 0.5% quarter-on-quarter, compared to 0.2% growth in Q4. Details showed that activity was likely boosted by stockpiling ahead of the now elapsed March-end Brexit deadline. This is likely to reverse in Q2.

As such, activity data for April should show sluggish growth, in line with the signals from surveys. Indeed, the Purchasing Managers’ Index (PMI) readings have been soft recently – the composite PMI came in at 50.9 in April and May – consistent with annualised GDP growth of below 1%.

Elsewhere, the US Trade Representative’s public-comment period on a proposed new round of higher tariffs (25%) on $300bn of Chinese imports comes to an end. A public hearing on the issue will take place on 17 June. A further escalation of the trade tensions between the US and China is one of the main downside risks for the global economic outlook.

According to OECD estimates, the imposition of a higher 25% tariff on all Chinese imports by the Trump administration would reduce global GDP by 0.7pp by 2021-2022, compared to the OECD baseline.


The Office for National Statistics will publish the UK jobs report. The labour market was solid in Q1, and we expect this trend to continue in April. In March, the unemployment rate fell to 3.8%, marking a new 45-year low. It should be unchanged in April.

In addition, wage inflation (excluding bonuses) is likely to soften in the coming months, in line with signals from surveys (the Recruitment & Employment Confederation labour market survey, notably).

It moderated slightly to 3.3% in Q1, down from a high of 3.5% in January. Other notable macroeconomic releases include the US NFIB Small Business Optimism Index (for May) and Mexico’s industrial production (for April).


Statistics Korea will publish South Korea’s unemployment rate for May. In April, the unemployment rate edged up to 4.1% – its highest level since Q1 in 2000 (that compares to an average of 3.8% in 2018 and 3.7% in 2017).

There have been mixed signals about the health of the economy: activity data for April points to a rebound in GDP in Q2, following a 0.4% quarter-on-quarter contraction in Q1, while sentiment surveys remained weak.

Going forward, we see prominent downside risks to the economic outlook, owing to the recent re-escalation of trade tensions between the US and China.

Elsewhere, consensus forecasts point to an increase in China’s consumer price inflation to 2.7% in May from 2.5% in the previous month, reflecting persistent strength in food prices.

By contrast, producer price inflation is expected to decline to 0.6% over the same period from 0.9% in April, in line with subdued developments in surveys (for instance, the output price component of the Caixin manufacturing PMI survey fell to a four-month low in May).

In India, industrial production should remain under pressure in April. It has trended downwards in recent months, falling to -0.1% year-on-year in March, having stood at 1.4% in January. Manufacturing surveys remained subdued in recent months and unfavourable trade conditions (the US recently dropped India’s denomination as an emerging market, implying tariffs can be imposed on $5.7bn exports to the US that used to be duty free) pose additional challenges.

Meanwhile, India’s consumer price inflation is expected to increase to 3.1% in May from 2.9% in the previous month, staying below the Reserve Bank of India’s 4% target.

Elsewhere, the Turkish central bank will probably leave its interest rates unchanged at 24%, but there is a possibility of a rate cut. In April, the central bank dropped its tightening bias. In addition, consumer price inflation has declined by more than expected in recent months, touching 18.7% in May. At any rate, some easing is likely in the second half of the year.

In the US, headline inflation – as measured by the consumer price index – will probably edge down to 1.8%-1.9% in May from 2% in the previous month, largely reflecting developments in energy prices. Core inflation (excluding energy and food) is likely to remain well contained at 2%-2.1% (it was 2.06% in April).


The Australian Bureau of Statistics will publish the country’s labour report for May. Recently, the labour market has shown some signs of deterioration. The unemployment rate increased to 5.2% in April, having stood at 4.9% in February.

Consensus forecasts suggest that Australia’s unemployment rate will be unchanged, while employment growth is expected to moderate to 15,000 new jobs in May from 28,000 in the previous month.

Elsewhere, the Swiss National Bank should leave its policies unchanged at its latest meeting.

In the eurozone, industrial production enjoyed a mini-recovery in Q1, increasing by 0.8% quarter-on-quarter after contracting 1.2% in Q4. However, the advance in Q1 was probably driven by the unwinding of some special factors that weighed on production in H2 2018. As such, it may be short-lived.

In addition, surveys suggest that underlying activity in the manufacturing sector remained subdued in early 2019. In particular, the manufacturing PMI declined to 47.7 in May, from 47.9 in April, having slipped into contractionary territory (below 50) in February.

Against a challenging backdrop of weak external demand amid a re-intensification of protectionist tensions, we expect industrial production to ease in coming months.

In Argentina, consumer price inflation will probably remain elevated in May, reflecting the almost 20% depreciation of the peso against the US dollar since the beginning of the year. It increased to 55.8% in April, from 54.7% in March.


Investors will shift their attention to China’s monthly activity data for May. In April, the economy lost momentum. Although consensus forecasts point to stabilisation in May, surveys suggest that the manufacturing sector remained under pressure. As a result, industrial production growth – which is expected to tick up to 5.5% year-on-year in May from 5.4% – may disappoint.

By contrast, consensus expectations for fixed asset investment and retail sales seem justified, based on early survey indications and fiscal measures (recent tax cuts should benefit consumption in coming months).

Fixed asset investment growth is expected to be unchanged at 6.1% year-on-year and retail sales growth is likely to increase to about 8% year-on-year over the same period from 7.2%.

In Russia, the central bank is expected to cut interest rates by 25bps to 7.5%, in line with the guidance provided at its April meeting. At the time, the central bank said it would consider rate cuts in Q2 or Q3, owing to a more benign inflation outlook. Since then, GDP growth has disappointed to the downside (it fell to 0.5% year-on-year in Q1, from 2.7%), which at the margin strengthens the case for easing.

Elsewhere, US retail sales should post an upward correction in May, reflecting the usual month-to-month volatility. Core control retail sales – a direct input for consumption of goods in GDP – was flat in April, following a 1.1% month-on-month increase in March.

Fundamentals for consumption are still solid, suggesting that consumption should make a larger contribution to growth in Q2, following a subdued performance in Q1.

Meanwhile, consensus forecasts suggest that US industrial production will increase by 0.2% month-on-month in May, following a 0.5% drop in the previous month. The manufacturing output is likely to show similar developments.

That said, the signal from surveys has been downbeat: the Institute for Supply Management (ISM) manufacturing index declined to 52.1 in May from 52.8 in the previous month and its Markit analogue fell sharply to 50.5 over the same period from 52.6 in April (now consistent with manufacturing activity that is close to stagnation).

This is a sponsored article from Hermes Investment Management


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