Hopes for further evidence of Japanese recovery
Bank holidays in the UK and US today mark the start of a quiet week of data releases for many of the major economies. The focus will be on Japan, where last week encouraging GDP data and a confident announcement by the Bank of Japan to maintain its current monetary policy suggest a recovery that is gathering strength.
Analysts will be looking at Japanese trade data, out today, for further evidence in support of this trend. A combination of stronger exports and a sharp fall in imports due to lower global energy prices pushed the March trade balance into surplus for the first time since June 2012, a similar effect is expected for April with another small surplus expected.
Inflation data for April are released on Friday. Japanese core inflation rebounded to 0.2 per cent year-on-year growth in March (taking into account last year’s consumption tax hike) up from zero growth in February. Analysts do not expect this upward momentum to continue, with annual core inflation remaining at 0.2 per cent for April.
Japanese labour market data for April are also out on Friday. March data showed some improvement, with the headline unemployment rate dropping to 3.4 per cent from 3.5 per cent in the previous month. Analysts expect little change in the April data, with unemployment remaining at 3.4 per cent.
Looking elsewhere, the Bank of Canada is set to announce its interest rate decision for May on Wednesday, the decline in energy prices is likely to have a negative effect on the Canadian economy but adjustments are not thought likely to manifest themselves for a couple more quarters yet. As a result, the BoC is expected to keep monetary policy where it is, but a shift to a less optimistic tone on the performance of the first quarter is expected. First-quarter performance will be confirmed on Friday with the release of GDP data, with most analysts expecting marginal growth compared with the final quarter of last year.
First-quarter GDP revisions for the UK and US are also out Friday, with the second estimates expected to show stark divergence. In the US the first estimate showed growth of 0.2 per cent at an annual rate, this is expected to be revised down to -0.9 per cent, a result of downward revisions to trade performance and inventories. UK GDP, at 0.3 per cent quarter on quarter is likely to be subject to a small upward revision, with better performance from industrial production and construction than first thought.