Eurozone headline inflation rises to seven percent. Inflation in the eurozone picked up in April, with the cost of food remaining high. But, after subtracting the volatile prices for food and energy, the underlying inflation rate eased for the first time in ten months. Headline inflation rose to an annual rate of seven percent from 6.9 percent, slightly above the consensus of staying flat. This was entirely due to energy inflation, which rose to an annual rate of 2.5 percent from -0.9 percent, whereas food inflation fell to an annual rate of 13.6 percent from 15.5 percent. Core inflation declined to an annual 5.6 percent from 5.7 percent, in-line with estimates, Following Russia’s invasion of Ukraine last year, energy prices soared, underpinning consumer prices across the single currency bloc, hitting a peak of 10.6 percent in October. Inflation later fell thanks to a slowdown of energy price rises, but remains well above the European Central Bank’s two percent target. The ECB on Thursday raised interest rates by a quarter of a percentage point to curb inflation.
Fed raises interest rates by a quarter point, signals potential pause. At the Federal Reserve’s (Fed) monetary policy meeting last Wednesday, policymakers voted unanimously to raise interest rates by a quarter of a percentage point, the tenth rate hike since March 2022, when it started its fight to bring inflation under control. In a widely expected move, the Fed raised its benchmark borrowing rate by 0.25 percentage point to a range of 5.0 – 5.25 percent, the highest in sixteen years. The rate sets what banks charge each other for overnight lending but has a direct impact on many consumer debt products such as home loans, auto loans and credit cards. "We're no longer saying that we anticipate" additional interest rate increases, Fed chair Jerome Powell said at a press conference, calling it a "significant change" thereby signalling a potential pause. However, he refused to rule out further action, saying: "We'll be driven by incoming data."
UK manufacturing downturn continues. Activity in UK manufacturing firms fell in April, as subdued demand and customers cutting costs took their toll, according to a closely-watched survey. The final S&P Global/CIPS UK manufacturing Purchasing Managers' Index (PMI) declined to 47.8 in April from 47.9 in March, reaching a three-month low and still below the 50 threshold that separates growth from contraction in the sector. Commenting on the latest survey results, Rob Dobson, Director at S&P Global Market Intelligence, said: “The UK manufacturing sector remained in the doldrums at the start of the second quarter. Output and new orders contracted, as manufacturers felt the impacts of client uncertainty, destocking and tightening cost controls.”
China manufacturing sector shrinks on weak demand. China’s manufacturing activity unexpectedly shrank in April, underlining the challenges the country is facing amid an uneven post-Covid economic recovery. The official manufacturing PMI fell to 49.2 in April from 51.9 in March, and for the first time since December 2022, the National Bureau of Statistics said on Sunday. The index fell below the level of 50, which signals contraction from the previous month. Economists had forecast a reading of 51.4. China's economy grew at a faster-than-expected pace in the first quarter thanks to robust services consumption, but factory output did not manage to keep the pace amid weak global growth. Slowing prices and surging bank savings are raising doubts about demand.