Diary: Working for the man

While markets will focus this week on central banks in the US, Britain and Japan as well US retail sales, attention here will be on the May jobs data and a couple of other releases that will tell us how business is handling the rougher conditions.

As well energy prices and supplies will grab attention this week, both here and offshore.

Thursday could see a small improvement in the Australian unemployment rate to 3.8% and up to 10,000 new jobs are forecast.

Economists at IHS Markit S&P Global also see Australia’s unemployment rate at 3.8%, “reflecting continued tightness in the labour market.”

Australia’s seasonally adjusted unemployment was at 3.9% in April, unchanged from a downwardly revised figure in March.

The number of unemployed fell 11,000 to 537,100, with people looking for only part-time work down 8,200 to 155,600, and those looking for full-time job falling 2,700 to 381,500. Meantime, employment rose 4,000 to a new peak of 13.402 million,

Besides the Fed central bank meetings will be in focus this week with the US Fed, the Bank of England and Bank of Japan all due to update their monetary policy decisions.

The Fed is the most important of the meetings, and markets around the world will be following the US news.

US retail sales, industrial production and Produce Prices data will be watched midway into the second quarter.

Likewise in China, where retail sales and industrial output figures will be released.

In the UK, April GDP data and the monthly labour market report will be awaited.

Following the US CPI data release on Friday, the Fed’s two-day Open Market Committee meeting will receive a level of scrutiny it hasn’t had even this year.

Market sentiment remains weak at present amid concerns over stubborn inflation and the impact of high prices on growth, with recent US business activity data pointing to slowing business activity amid rising prices and softer demand.

Meanwhile the UK, faced with slowing growth, could see the Bank of England take a more cautious 0.25% rise amid fears of triggering a recession.

For the Bank of Japan, despite USD/JPY rate hitting a two-decade high in recent weeks, any lifting of interest rates is not expected.

Japan had also only recently seen growth and demand catching up towards other developed world economies after virus restrictions were gradually eased.

A busy week of economic releases also brings retail sales and industrial production data from the US and China, two countries running at differing speeds in May.

While some slowdown in the US may be the case amid cost pressures, a slower deterioration of conditions had been seen for mainland China in May’s business activity surveys which, if supported by the official data, could see inventor focus shift more positively towards China, and also anticipate some easing of global supply constraints.

New Zealand’s first-quarter GDP growth is likely to have eased to an annual 0.6% from 3.1% in the prior quarter.

This moderation in growth will likely reflect softer domestic spending following the Omicron-led resurgence in COVID- 19 cases and the restrictions to curb the spread; higher borrowing costs will be a contributing factor through the rest of this year.

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China’s factory and retail sales activity for May are out this week and likely to have seen another month of declines in year-on-year terms, reflecting the hit to manufacturing and demand from extended COVID-19 restrictions imposed in key cities led by Shanghai and Beijing.

Chinese cost pressures eased a touch in manufacturing because of continuing lower levels of activity. Consumer costs were unchanged but still at multi-month highs.

Friday saw China’s annual inflation at 2.1% in May 2022, unchanged from April’s five month high figure and compared with market forecasts of 2.2%.

On a monthly basis, consumer prices fell 0.2% in May, the first monthly decline in five months, compared with consensus of a 0.3% drop, and reversing April’s 0.4% gain.

That reflects weak consumer demand and spending thanks to the lockdowns.

Prices of food rose the most since September 2020, up for the second straight month (2.3% vs 1.9% in April), as consumption strengthened following an easing of COVID-lockdowns in some major cities, including Shanghai and Beijing.

Meanwhile, non-food costs continued to increase (2.2% vs 2.1%).

China has set a target of CPI at around 3% for this year, the same as in 2021.

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China’s producer price inflation eased to a 14-month annual low of 6.4% in May from 8.0% in the prior and matching market consensus.

The latest figure represented the 17th straight month of increase in producer prices, amid weak demand for steel, aluminium, and other key industrial commodities due to strict COVID-19 restrictions.

On a monthly basis, producer prices increased by 0.1%, after a 0.6% gain in April.

Over the first five months of the year, China’s factory gate prices grew by 8.1%.