Macro Roundup (May 2)

SHANGHAI, May 2 (SMM) – This is a roundup of global macroeconomic news last night and what is expected today.

Last night

The US dollar index broke 92, driven by upbeat data of the US economy and hovered at 92.4 overnight.

Most LME metals fell with the stronger US dollar. LME zinc led the declines with a loss of 1.6%, copper lost 0.87% and hit a monthly low at one point.

China’s official manufacturing purchasing managers’ index (PMI) fell to 51.4 in April, from 51.5 in March, the National Bureau of Statistics (NBS) said on Monday, but remained well above the 50-point mark that separates growth from contraction. The PMI for services rose to 54.8 in April from 54.6 in March, while the composite PMI rose to 54.1 from 54.

The US personal consumption expenditures (PCE) price index jumped 2% year on year in March. This measure of underlying inflation surged to hit the Federal Reserve Board’s 2% target for the first time since February 2017. The core PCE price index, excluding the volatile food and energy components, rose 1.9% year on year, the biggest gain since February 2017.

The US personal income rose 0.3% month on month in March after increasing by the same margin in February.

The US pending home sales index rose just 0.4% month on month in March, below the expected 0.5%, and it fell 4.4% year on year.

The Markit final US PMI came in at 56.5 in April, up from 55.6 in March and matching the forecast.

“April saw US manufacturers reporting the strongest monthly improvement in business conditions since September 2014. The survey suggests the economy has started the second quarter on a solid footing and sends an encouraging signal for GDP growth to accelerate after the modest 2.3% rate of expansion seen in the first quarter,” said chief business economist at IHS Markit, Chris Williamson.

He added there is “plenty of evidence” to suggest the strong growth will continue through May, and that “warning lights are being flashed in relation to inflation”.

“Suppliers are hiking prices in response to surging demand, while tariffs and higher oil prices are also exerting upward pressure on costs. With the average price of goods leaving factories rising at the fastest rate since 2011, consumer price inflation looks set to accelerate,” Williamson said.

The Institute for Supply Management (ISM) index of national factory activity dropped to a reading of 57.3 in April from 59.3 in March. A reading above 50 in the ISM index indicates growth in manufacturing, which accounts for about 12% of the US economy.

The US construction spending unexpectedly fell 1.7% month on month in March as a sharp decline in homebuilding led to the biggest drop in investment in private construction projects in more than seven years. February data was revised to show construction spending increased by 1% instead of the previously reported 0.1% gain.

In March, spending on private construction projects declined 2.1%, the largest fall since January 2011. Outlays on private residential projects plunged 3.5%, the biggest drop since April 2009.

Inventories of US crude oil during the week ended April 27 rose by 3.43 million barrels, according to data from the American Petroleum Institute (API). Gasoline inventories increased by 1.6 million barrels and refined oil inventories fell by 4.08 million barrels.

Day ahead

Key factors to watch today include China’s Caixin manufacturing PMI in April, the eurozone’s Markit final manufacturing PMI in April and its first quarter GDP, as well as the US ADP private employment report.

The US dollar is expected to remain rangebound at highs today.

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