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Macro Snapshot — UK private sector activity slows; Japanese factory activity in May rises at slowest pace in 3 months

RIYADH: Britain’s private sector momentum has slowed far more than expected this month, adding to recession worries as inflationary pressures mounted, according to a business survey on Tuesday that showed growing pessimism.

S&P Global’s Flash Composite Purchasing Managers’ Index, a monthly indicator of services and manufacturing, fell to 51.8 in May from 57.6 in April, its lowest level since February last year. .

The preliminary reading was worse than any forecast in a Reuters poll of economists, which had indicated a drop to 57, and the depth of the fall was greater than anything seen before COVID-19.

“The collapse of the composite PMI in May is the clearest sign that demand is weakening in response to the intense pressure on real household disposable incomes,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

So far, most surveys of UK business activity have been quite robust, despite consumer confidence hitting rock bottom after inflation hit a 40-year high of 9%.

US new home sales plummet

Sales of new single-family homes in the United States fell to their lowest level in two years in April, likely due to rising mortgage rates and soaring prices that pushed first-time buyers and those looking of entry-level properties outside the housing market.

New home sales plunged 16.6% to a seasonally-adjusted annual rate of 591,000 units last month, the lowest level since April 2020, the Commerce Department said Tuesday. The March sales pace was revised down to 709,000 units from the previously reported 763,000 units.

Sales have now declined for four straight months. New home sales fell 5.9% in the Northeast and 15.1% in the Midwest. They fell 19.8% in the densely populated South and fell 13.8% in the Midwest.

Nigeria raises interest rates

Nigeria’s central bank on Tuesday raised the benchmark interest rate by 150 basis points to 13%, its first hike in more than two years, to tackle rising inflation, causing markets to tumble.

The move surprised analysts and traders who expected the Monetary Policy Committee to keep the rate unchanged.

But Governor Godwin Emefiele told a news conference the rate hike was needed to bring inflation under control, which accelerated to 16.82% in April, its highest level in eight months, in a context of fragile economic recovery.

Indonesia holds rates

Indonesia’s central bank on Tuesday announced more aggressive reserve requirement ratio hikes for banks, expecting inflation to edge slightly above its target range this year, but kept interest rates unchanged at a record high. .

Bank Indonesia announced an acceleration of RRR hikes, ordering banks to park 7.5% of their reserves from July and 9% from September. This compares to BI’s previously announced policy trajectory, in which BI had set three staggered RRR hikes this year from 3.5% to 6.5% in September.

BI left the benchmark 7-day reverse repurchase rate at a record high of 3.50%, as expected by 25 of 27 economists polled by Reuters. Its other two main rates also remained unchanged.

Poland’s budget surplus

Poland had a budget surplus of 9.2 billion zlotys ($2.14 billion) at the end of April, the official PAP news agency said on Tuesday, citing Finance Minister Magdalena Rzeczkowska.

Poland had a deficit of 0.3 billion zlotys at the end of March.

Separately, a government spokesperson said the deficit at the end of 2021 was 26.4 billion zlotys, or 65.1% of what was budgeted.

The Philippines lowers its growth target

The Philippines has revised its gross domestic product growth target for 2022 to 7%-8% from the previous range of 7%-9% to account for external risks, the government announced on Tuesday.

He also cut the budget deficit target slightly to 7.6% of GDP from 7.7%, among revisions he said take into account the impact of the Russia-Ukraine conflict, China’s slowdown and the normalization of monetary policy in the United States.

The government has, however, kept the GDP growth target within the 6-7% range for 2023 and 2024, as it expects the national economy to maintain its strong recovery in the medium term.

GDP would grow at the same rate in 2025, economic officials from the Development Budget Coordinating Committee said.

German inflation will reach 7%

Germany’s inflation rate in 2022 will more than double from last year’s 3.1% as already high energy and food prices are pushed up by war in Ukraine , the country’s chambers of commerce and industry announced on Tuesday.

The DIHK said it now expects the inflation rate to hit 7%, after initially forecasting a 3.5% rise in its February forecast.

Germany’s economy ministry said in April it had seen an inflation rate of 6.1% in 2022 and 2.8% next year, citing the effects of energy prices in the largest economy in Europe.

French commercial activity

French business activity slowed slightly in May from the previous month, a preliminary survey showed on Tuesday, as inflationary pressures shone fewer COVID-19 restrictions.

S&P Global said its May flash Purchasing Managers’ Index for the French services sector was 58.4 points, down from a final April figure of 58.9. Economists polled by Reuters had forecast 58.6 for the May flash reading.

The activity of Japanese factories is growing

Japan’s manufacturing activity grew at the slowest pace in three months in May as supply bottlenecks from parts shortages and COVID-19 lockdowns in China slowed growth. production and new orders.

Activity in the services sector improved for the second month in a row on stronger domestic demand as the impact of the pandemic eased, although businesses in the services sector were held back by the largest increase in input prices ever recorded.

(Contributed by Reuters)


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