Economy in Brief

• Leading index decline is largest in six months.
• Coincident Indicators continue to increase moderately.
• Lagging index strengthens after holding steady.

EMU Inflation Trends Offer Hope and Hype- Inflation in the European Monetary Union rose by 0.2% month-to-month in April, the same as in March. Core inflation, however, picked up, rising by 0.4% but that was after being flat in March. The sequential growth rates from 12-months to six-months to three-months show the headline inflation rate at 2.4% over 12-months falling to 2% over 6-months, then rising to a 3% annual rate over three-months. The core rate for the monetary union rose 2.9% over 12-months at a 2.7% annual rate over six-months, it steps up to a 2.8% annual rate over three-months. Headline inflation is resisting moving down to the 2% level consistently while core inflation appears to be stuck just short of 3%. Whether these trends are good enough depends on whether the ECB sees itself implementing precision-guided policy or playing horseshoes and hand grenades.

• Single-family starts decline but multi-family surge.
• Starts are mixed throughout the country.
• Building permits fall to lowest level in over one year.

• IP was unchanged in April with manufacturing falling 0.3% m/m
• Manufacturing decline led by 2.0% m/m drop in motor vehicle output
• Mining fell for the third month of the past four
• Capacity utilization slipped to 78.4%

• Import prices rise for fourth consecutive month.
• Excluding fuels, import prices edge up for sixth straight month.
• Export price gain improves.

• Even with the May decline, the index remains in positive territory, pointing to expansion.
• However, both shipments and orders subindexes fell markedly and more worryingly into contraction territory.
• The employment subindex rose slightly but remained negative.
• Expectations decline slightly but remain elevated.

• Initial claims come back toward recent tight range
• Continued weeks claimed rise somewhat in May 4 week
• But insured unemployment rate holds at 1.2% into a 14th month

Despite a sharp 4.5% month-to-month jump in Japan’s industrial production, a gain much larger than expected, Japan’s production index is still lower on balance over three-months six-months and twelve-months. It is still 5.8% below its level in January 2020 before Covid struck and it is only 87% of its past cycle peak. The March jump by itself is impressive and welcome, but Japan still has so far to go to repair the disruption it has had in manufacturing and across industry.