Global economic update
Written and accurate as at: May 11, 2022 Current Stats & Facts
Australia
Inflation increased 2.1% in March, pushing the annual rate to 5.1%. March’s unemployment was unchanged at 4.0%, slightly above the anticipated 3.9%. Retail sales increased by 1.6% in March. The Westpac-Melbourne Institute Index of Consumer Sentiment fell by 0.9% in April amid rising inflation, a threat of interest rate rises and widespread flooding across the east coast.
The survey suggested the government’s budget in March had a limited impact on the national mood, even though it contained preelection tax breaks and cuts to fuel excise. FOR MARCH, the NAB Business Survey saw a 3 point increase in business confidence to +16 points. Trading conditions and profitability also rose markedly, suggesting demand remains strong, particularly in the retail sector.
The S&P Global Composite PMI rose to 55.9 in April, with both manufacturing and service sector output growing, driven by higher demand as COVID restrictions eased. The trade surplus increased by $9.3 billion in March, beating market forecasts of $8.5 billion amid a decline in imports.
Global
Global Covid-19 cases continue to rise, with numbers surpassing 513 million instances and 11.5 billion vaccine doses administered at the end of April. Continuing outbreaks in China have caused ongoing restrictions and threaten to impact global supply chains again. The Russian war on Ukraine continued to pressure energy prices and caused the IMF to downgrade global annual growth projections to 3.6%.
US
Rising inflation remains a concern, with the IMF calling it a ‘clear and persistent danger’ for the global economy. In line with forecasts, inflation in the USA jumped 1.2% in March, pushing the annual rate to 8.5%, the highest since December 1981 and putting pressure on the Federal Reserve to increase interest rates at their next meeting.
Consumer sentiment increased to 65.2 in April, well about the expected 59.0. PPI rose 1.4% in March, above the expected 1.1% increase and marking the most significant expansion since December 2009.
Non-farm payrolls added 428,000 jobs in April, above the anticipated 391,000, whilst the unemployment rate was unchanged at 3.6%, above the expected 3.5%. Personal incomes grew 0.5% in March, above the anticipated 0.4%.
The S&P Global Composite PMI dropped to 56 in April as the expansion of manufacturing production was offset by softer service growth. The trade deficit widened sharply to a record high of $109.8 billion in March, as a broad-based rise in prices, significantly energy lifted imports by 10.3%
Europe
The European Central Bank held interest rates at 0.0% during the April meeting, consistent with the March quarter. President Lagarde noted that the timeline for potential interest rate increases had not been determined. The annual inflation rate rose to 7.5% in April and is now over three times the 2% ECB target.
Energy price increases have slowed but remain incredibly high. Consumer confidence declined to -22 in April as the war in Ukraine and rising inflation continue to dampen consumers’ moods. In March, retail sales fell 0.4%, pushing the annual rate to just 0.8%, as soaring prices caused customers to cut back on some purchases. Unemployment was steady at 6.8% in March but slightly above the anticipated 6.7%.
The S&P Global Composite PMI increased to 55.8 in April, the sharpest growth in private sector activity in seven months. PPI rose to 5.3% in March, while the annual rate increased 36.8%, marginally above the expected 36.3%.
UK
In the UK, GDP rose 0.1% in February, lower than the 0.3% forecast and down on the 0.8% growth in the month prior. Inflation rose 1.1% in March, above the 0.7% expected, with the annual inflation rate rising to 7.0%. The unemployment rate fell to 3.8% in February, according to expectations. In April, consumer confidence fell to -38, its lowest level since July 2008, as rising interest rates and inflation took a toll.
In March, retail sales dropped 1.4%, well down on the anticipated 0.3% decline and bringing the annual rate to 0.9%. The PMI composite index came in at 58.2 in April, down from the 60.9 in March. PPI was 2.0% in March, bringing the annual rate to 11.9%.
China
China’s GDP grew 1.3% in the March quarter, with the yearly growth rate at 4.8%, ahead of the 4.4% expected and the 4.0% recorded in December. CPI was flat in March, slightly beating the anticipated 0.1% fall, with the annual rate increasing to 1.5%. The unemployment rate was 5.8% in March, above the government’s target of 5.5% for the year.
The Caixin Composite PMI plunged to 37.2 in April, with both manufacturing and services activity contracting. The Manufacturing PMI fell to a 26 month low of 46 in April as COVID -19 outbreaks took a toll on the economy. Annual industrial production came in at 5.0% in March, slightly ahead of the 4.5% expected but down from the 7.5% in February.
Annual retail sales fell -3.5% in March, below the -1.6% expected and down on +6.7% in the prior month. The merchandise trade surplus widened to USD$51.12 billion in April, above the USD$50.65 billion expected, as exports increased by 3.9% yearly while imports were flat. COVID-19 outbreaks continue to cause lockdowns in major centres, with Beijing the latest city to impose restrictions and impact global supply chains.
Japan
During its April meeting, the Bank of Japan left its key short-term interest rate unchanged at -0.1%. It also revised its inflation forecast up to 1.9% but believes inflation is primarily driven by one-time causes such as the recent spikes in energy prices, so it is projected to ease to 1.1% in 2023. Policymakers cut the FY 2022 GDP growth forecasts to 2.9% from the 3.8% forecast in January. Japan's annual inflation rate rose to 1.2% in March, marking the seventh month in a row of increases but remaining well below the BOJ target of 2%.
The Japanese unemployment rate dropped 10bps to 2.6% in March, better than the anticipated 2.7%. Japanese consumer confidence edged in April to 33, the first improvement in six months after the government ended the quasi-state of emergency in late March following a decline in new COVID-19 infections and increasing vaccinations.
Retail sales increased 2 % in March, with the annual rate rising 0.9%, exceeding the anticipated 0.4% as consumption rebounds following the improvement in the COVID-19 situation. The PMI Composite Final came in at 51.1 in April, above the anticipated 50.9, while the PMI Services Final came in at 50.7 in April, above the 50.5 expected.
Currency
Over April, the Australian dollar dived -5.8% lower relative to the greenback and -0.8% in trade-weighted terms. Dropping to its lowest level since February this year, the dollar continues to be challenged by investor risk sentiment. Protracted geopolitical risk in Ukraine, global central bank quantitative tightening and recently China's 'zero-covoid' lockdowns have had the most significant impact on the strength of the AUD in April.