Macro Roundup (Jun 15)

SHANGHAI, Jun 15 (SMM) – This is a roundup of global macroeconomic news last night and what is expected today.

Last night

The US dollar index soared and registered a fresh high in June overnight due to better-than-expected retail sales growth in May and the European Central Bank’s (ECB) dovish decision to hold off on rate hikes.

The ECB announced it would reduce monthly asset purchases between October and December to 15 billion euros until the end of 2018 and then conclude the programme. The bank also claimed interest rates would stay at their present levels “at least through the summer of 2019”.

Interest rate on the main refinancing operations, marginal lending facility, and the deposit facility were unchanged at 0.00 %, 0.25% and -0.40%, respectively.

Base metals fell across the board overnight. LME nickel led the declines with a loss of over 2%, copper, aluminium, lead, and zinc dropped over 1%. SHFE nickel slid over 1%.

China’s economic growth fell short of expectations in May as expansion in fixed-asset investment, industrial output and retail sales all trailed analysts’ estimates.

Fixed-asset investment excluding rural households, a key driver of domestic demand, rose 6.1% year on year during the January-May period, slowing down from a 7% growth pace in the first four months. The increase marked the weakest growth since the data series was first released in February 1998.

Growth in retail sales, which include spending by households, businesses and government departments, slowed sharply to 8.5% year on year in May, from 9.4% in April. May’s growth was the weakest increase since June 2003. In the January-May period, the growth came in at 9.5%, compared to the expected and previous 9.7%.

Value-added industrial output, which measures production at factories, mines and the utilities sector, rose 6.8% year on year in May, slightly down from an increase of 7% in April and lower than the forecast of 7%. In the January-May period, the output grew 6.9% year on year, in line with expectation and the previous level.

Unemployment rate dipped to 4.8% in May from 4.9% in April.

New applications for unemployment benefits in the US unexpectedly fell last week and the number of Americans on jobless rolls remained at a low level, pointing to a rapidly tightening labour market.

Initial claims for state unemployment benefits dropped 4,000 to 218,000 over the week ended June 9, compared to the expected 223,000.

The claims report also showed the number of people receiving benefits after an initial week of aid declined 49,000 to 1.7 million in the week ended June 2, the lowest level since December 1973.

US retail sales increased more than expected in May and recorded the largest month-on-month growth in six months as consumers bought motor vehicles and a range of other goods even as they paid more for gasoline. This suggested an acceleration in economic growth in the second quarter.

In May, retail sales jumped 0.8%, the biggest advance since November 2017, compared to the expected 0.4% and April’s 0.4% after revision.

Excluding automobiles, gasoline, building materials and food services, retail sales increased 0.5% in May after an upwardly revised 0.6% increase in April. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. They were previously reported to have risen 0.5% in April.

US price index for all imports in May continued the upward trend that began in August 2017 and advanced 0.6% month on month, in line with the gain in April. On a yearly basis, the index increased 4.3% in May, larger than the expected 3.9% and April’s 3.6%.

Day ahead

Key factors to watch today include the eurozone consumer price index (CPI) in May, trade balance in April, the US industrial production in May, and consumer confidence in June surveyed by the University of Michigan.