Chinese economy clearly slowing. The latest round of Chinese data for April (retail sales, capital investment, and factory output) all missed expectations and pointed to slower growth. While China will report 6% gross domestic product (GDP) growth or more-consistent with their stated objective-actual growth is probably closer to 5%. As a result, China is increasingly likely to add more stimulus and may be more inclined to make a trade deal if their economy weakens further.
Global manufacturing activity slowed again in April. Global purchasing managers’ index (PMI) data has reflected slowing manufacturing activity worldwide for over a year now, with the latest 50.3 reading barely above the 50 level that marks the breakpoint between expansion and contraction. Downside risk to our 2019 global GDP growth forecast of 3.7% has increased due to escalating U.S.-China trade tensions and further weakness in Europe. Global leading indicators paint a favorable picture of Emerging Markets and less favorable in Europe, with the U.S. somewhere in between.
Positive trade developments? Yesterday’s news was encouraging. First, President Trump will reportedly delay his decision on European and Japanese auto tariffs by as much as six months (the deadline was this Saturday, May 18). Second, trade officials are reportedly making progress toward a resolution to steel and aluminum tariffs with Mexico and Canada. This created some space for tougher talk on China, but U.S. markets responded positively to overall developments with futures pointing to a higher open.
- Housing Starts (Apr)
- Building Permits (Apr)
- Philadelphia Fed Business Outlook (May)
- Initial Jobless Claims (May 11)
- Leading Index (Apr)
- University of Michigan Sentiment Index (Preliminary May)
- Eurozone CPI Report (Apr)
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Index data obtained via FactSet
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