22 May 2015
Key time of the year to assess global economic momentum - ANZ
FXStreet (Bali) - The ANZ Research Team explains on their latest note to clients how critical the current data-loaded period is in order to get an update on global economic momentum, one that the bank continues assess as being characterized by 'lukewarm' activity in the US, Europe and China.
Key Quotes
"We are currently right in the middle of the busy period of the month for the global data calendar. Manufacturing and sentiment surveys are providing a timely update on global economic momentum. Unfortunately the message overnight was not one that global growth bulls will necessarily look too happily on. Almost unanimously, activity indicators in the US, Europe and China (with the HSBC PMI survey disappointing mildly yesterday) all came in on the weaker side of expectations in May."
"That is certainly not to say the data is suggesting the global economy is rapidly losing momentum and on a downward trajectory – far from it. Rather, the message was more the case of pointing to a global economy that is continuing to plod along at a somewhat more moderate pace of growth."
"That may not sound that bad, and it’s not. But considering the degree of stimulus that has been, or still is, being thrown at some of these larger economies, we are sure that policy makers would be wishing for something a little hotter than ‘lukewarm’."
"That is particularly the case for the Fed. It has explicitly stated that it is in “data-watch mode” to determine when it will begin its process of policy normalisation. The temporary factors weighing on Q1 growth were clear. But evidence of a decent rebound from that weakness is still limited, and that is a little more puzzling."
"We still believe that evidence will emerge by September, when we now expect the first hike, but the onus is on the data to justify that. Elsewhere, recent data wobbles are only likely to reinforce policy maker action. The ECB appears to be clear in its view that it will continue its QE program until at least September 2016 and our Asian colleagues expect additional policy easing in China."
Key Quotes
"We are currently right in the middle of the busy period of the month for the global data calendar. Manufacturing and sentiment surveys are providing a timely update on global economic momentum. Unfortunately the message overnight was not one that global growth bulls will necessarily look too happily on. Almost unanimously, activity indicators in the US, Europe and China (with the HSBC PMI survey disappointing mildly yesterday) all came in on the weaker side of expectations in May."
"That is certainly not to say the data is suggesting the global economy is rapidly losing momentum and on a downward trajectory – far from it. Rather, the message was more the case of pointing to a global economy that is continuing to plod along at a somewhat more moderate pace of growth."
"That may not sound that bad, and it’s not. But considering the degree of stimulus that has been, or still is, being thrown at some of these larger economies, we are sure that policy makers would be wishing for something a little hotter than ‘lukewarm’."
"That is particularly the case for the Fed. It has explicitly stated that it is in “data-watch mode” to determine when it will begin its process of policy normalisation. The temporary factors weighing on Q1 growth were clear. But evidence of a decent rebound from that weakness is still limited, and that is a little more puzzling."
"We still believe that evidence will emerge by September, when we now expect the first hike, but the onus is on the data to justify that. Elsewhere, recent data wobbles are only likely to reinforce policy maker action. The ECB appears to be clear in its view that it will continue its QE program until at least September 2016 and our Asian colleagues expect additional policy easing in China."