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The following is an extract from IHS Markit's latest Week
Ahead Economic Preview. For the full report, please click on the
'Download Full Report' link.
The coming week sees central bank policy meetings in the US and
Japan alongside some key economic data releases. While GDP updates
in the US, Eurozone, South Korea and Taiwan will shed light on
first quarter economic growth, US durable goods orders and a host
of survey data for will give further insights into global trends at
the start of the second quarter following the April flash PMIs.
Eurozone inflation data will also be eagerly awaited.
FOMC meets amid improving outlook and fresh GDP
numbers
The third FOMC meeting of the year will see the Fed seeking to
reassure that inflation will not become a concern. The policy
decision comes a day after first quarter GDP is released, which is
on course to show a 6.1% annualised gain according to IHS Markit's
tracker, with the second quarter tracking at just over 8%. Recent
survey data have meanwhile also shown sharply rising price
pressures.
At the last meeting the FOMC reiterated its commitment to
continue current asset purchases until "substantial further
progress" was made toward its inflation and employment goals, but
any upside surprises to GDP may heighten the risk of tapering
earlier than currently expected. See also our research on "Will
consumers spend a chunk of the accumulated excess saving, sparking
an inflationary boom?"
Eurozone GDP to signal decline
Over in Europe, the GDP numbers for the first quarter and
inflation data will be eagerly awaited. GDP is expected to have
fallen by around 0.8%, albeit with France bucking the downturn with
modest growth, but recent PMI data have surprised to the upside and
strong growth looks likely in the second quarter. The inflation
numbers will meanwhile be scoured for clues of whether rising
industrial prices are feeding through to core inflation. With the
ECB having pledged further support for the eurozone that remains
deeply affected by the rise in COVID-19 cases and lockdowns, the
combination of rising debt and higher bond yields associated with
higher inflation remains a concern (see also Is the eurozone at
risk from another sovereign debt crisis?).
Bank of Japan and China PMI
The Bank of Japan also meets amid a K-shaped recovery and an
outlook which is clouded by rising COVID-19 infections. The BOJ is
reported to be contemplating upping their growth forecast but
downgrading the inflation outlook, the latter adding scope to stick
with the current monetary policy settings following March's
framework review.
Across Asia, the turn of the month ushers in the PMI releases
with China's NBS publishing their non-manufacturing and factory
surveys on Friday. The Caixin PMIs will be anticipated in the
following week.
Purchasing Managers' Index™ (PMI™) data are compiled by IHS Markit for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies, and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.
