FXTRADING Economic Data Summary (Asia-Pacific | 06/15)

New Zealand Manufacturing Falls Back into Contraction

New Zealand‘s manufacturing sector returned to contraction territory in May, with the BNZ-BusinessNZ Performance of Manufacturing Index declining from 50.4 to 49.9. The reading not only fell below the 50-point expansion threshold but also remained well below March’s 52.8 level and the long-term average of 52.5. The data suggest that the brief signs of improvement seen earlier have not been sustained, and the sectors recovery momentum remains weak.

Looking at the sub-indices, deliveries stood at 51.9 and finished goods inventories at 53.8, both remaining in expansion territory. However, production, employment, and new orders all hovered around the 50 mark, indicating that underlying demand remains soft. At the same time, elevated fuel costs continue to increase operating pressures for businesses. FXTRADING believes that New Zealands manufacturing recovery remains fragile, with weak demand and rising energy costs continuing to weigh on business activity. The sector is therefore likely to remain subdued in the near term.

India Inflation Climbs to a 16-Month High

India‘s Consumer Price Index rose 3.9% year-on-year in May, up from 3.5% in April and marking the highest level in 16 months. However, the figure came in slightly below market expectations of 4.0% and remained below the Reserve Bank of India’s 4% midpoint target, suggesting that inflation remains broadly manageable.

Food prices were the primary driver behind the latest increase in inflation, with food inflation rising from 4.2% to 4.8%, also reaching a 16-month high. Higher energy and fertilizer costs continued to feed through into agricultural production. Meanwhile, personal care and social services prices increased by 18.5%, while restaurant and accommodation prices rose 5.75%. FXTRADING believes that although Indian inflation has reached a recent high, it remains below the central banks target level, limiting near-term pressure for policy tightening. However, continued increases in food prices warrant close attention, while energy costs remain a key factor shaping the inflation outlook.

UK Economic Growth Moderates

The UK economy contracted by 0.1% month-on-month in April, in line with market expectations. Following growth of 0.4% in February and 0.3% in March, the decline suggests that economic activity lost some momentum at the start of the second quarter. A 0.2% fall in services output was the main drag on growth, while construction expanded by 0.1% and manufacturing output was broadly unchanged.

Despite the weaker monthly reading, the broader growth trend remains intact. Over the three months to April, UK GDP expanded by 0.7%, up from 0.6% and 0.5% recorded in the comparable periods previously. Services output increased 0.8% over the three-month period and continued to provide the primary support for economic growth. Construction activity rose 1.6%, extending its recovery trend, while manufacturing output declined by 0.1%, reflecting ongoing weakness. FXTRADING believes that although UK economic activity softened in the short term, the overall growth trend has not been derailed. Services and construction continue to support expansion, while persistent weakness in manufacturing suggests that external demand and higher interest rates are still constraining business activity.

US Consumer Inflation Concerns Ease

The University of Michigan Consumer Sentiment Index rose from 44.8 to 48.9 in June, marking the first notable improvement in several months. The Current Economic Conditions Index increased from 45.8 to 48.3, while the Consumer Expectations Index climbed from 44.1 to 49.3, indicating that households became more optimistic about both current economic conditions and future prospects.

Lower energy prices were a key factor behind the improvement in sentiment. Declining gasoline prices eased pressure on household budgets, while assessments of personal finances and business conditions also improved. Nevertheless, overall confidence remains subdued, with sentiment still 13% below January levels and 19% lower than a year ago. At the same time, one-year inflation expectations fell from 4.8% to 4.6%, while long-term inflation expectations declined from 3.9% to 3.4%, though both remain above levels seen at the beginning of the year. FXTRADING believes that the improvement in consumer sentiment suggests household concerns about the economic outlook have eased somewhat, but confidence remains relatively low. Although inflation expectations have moderated, they remain elevated, and future consumer spending will continue to be influenced by inflation trends and developments in the labor market.