Economy in Brief

Expectations about when exactly central banks will begin an easing cycle have remained a dominant driver of financial market trends in recent weeks. But in the background to this, heightened enthusiasm for the rollout of Artificial Intelligence infrastructure, reinforced by stellar corporate earnings reports, have additionally contributed to an upbeat mood. In our charts this week we review the messages from the US and European consumer confidence reports that have been released over the past few days (chart 1). Key messages from those reports concern the big role that energy price fluctuations have played for confidence in recent months (chart 2). European consumers also now seem much happier, a message that chimes with the message from this week’s broad money supply data for the euro area as well (chart 3). Labour market activity, nevertheless, has continued to slow in many of the world’s major economies according to high frequency data, a factor that could impinge on the outlook for consumer spending going forward (chart 4). Taking a step back from cyclical matters, we look next at the deterioration in the UK’s net direct investment position in light of the heavy focus on the economy’s predicament during the current general election campaign (chart 5). Finally, and against current global concerns about China’s industrial policies, we look at some sector-specific export trends in China and the recent pace of deflation in its export prices (chart 6).

• Growth remains slowest since mid-2022.
• Inventories & foreign trade subtract slightly more from growth.
• Moderate rise in domestic final demand gain is lessened.
• Acceleration in price index growth is little changed.

• Decline brings sales to four-year low.
• Weakness spreads throughout the country.

• Largest goods trade deficit since May ’22 and larger than expected.
• Exports rebound 0.5% in April, the fourth m/m gain in five months.
• Imports rise 3.1% vs. a 1.7% March drop.

• Very tight range in initial jobless claims has held since last August.
• Continued weeks claims also very steady, between 1.728 million and 1.829 million, with flat trend.
• All the more, the insured unemployment rate is unchanged since March 2023.

• Drop in mortgage applications follows three weekly increases.
• Purchase & refinancing applications both decline.
• Effective interest rates move higher.

• Gasoline & diesel fuel prices ease minimally.
• Crude oil costs decline after stabilizing in the prior week.
• Natural gas prices increase.