Janet Mui: weekly economic update 18 April

Data released this week has continued to surprise - positively for China and the UK - despite continuing uncertainty



Janet Mui
Global Economist, Cazenove Capital

China data rebounds

Monthly data shows China activity rebounded and exceeded expectation in March in a broad-based manner. After the bounce in manufacturing PMI previously, today’s report provides evidence that activity has bottomed out in China and the stimulus have started to kick in. With the better-than-expected aggregate credit in March as well, we think the current recovery will continue. Whilst the Chinese authorities will remain supportive to growth, the recovery in data decreases the need for further easing this year.

However eurozone slowdown continues

Eurozone composite Purchasing Manager indices continued to slow in April, driven by the services sector. Eurozone manufacturing PMI saw a modest pick-up some stabilisation but remained firmly in contraction territory. In particular, Germany manufacturing PMI continued to be weak and disappointed. We still see near-term weakness because Germany factory orders continued to fall. In the quarters ahead, we expect to see recovery because better Chinese data tends to lead eurozone activity. We note that the expectation indices of the IFO survey and ZEW survey have picked up, which historically is a good indicator of turning point in activity.

Surprisingly positive UK data despite Brexit uncertainty

UK data continued to defy Brexit blues and surprised to the upside this week. Retail sales rose strongly in March, and Q1 as a whole, despite downbeat consumer sentiment. While we think there is stockpiling, the fundamentals remain strong for consumers. The labour market remains tight and wage growth is at a cycle high of 3.4%. Also, UK inflation remains tamed, with headline inflation and core inflation remaining below expectation. Real wage growth is likely to provide a cushion to consumer spending. However, we still think that the prolonged Brexit uncertainty will do more harm than good to the economy.

This article is issued by Cazenove Capital which is part of the Schroders Group and a trading name of Schroder & Co. Limited, 1 London Wall Place, London EC2Y 5AU. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. 

Nothing in this document should be deemed to constitute the provision of financial, investment or other professional advice in any way. Past performance is not a guide to future performance. The value of an investment and the income from it may go down as well as up and investors may not get back the amount originally invested.

This document may include forward-looking statements that are based upon our current opinions, expectations and projections. We undertake no obligation to update or revise any forward-looking statements. Actual results could differ materially from those anticipated in the forward-looking statements.

All data contained within this document is sourced from Cazenove Capital unless otherwise stated.


Janet Mui
Global Economist, Cazenove Capital


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