British Business Lobby Cuts GDP Forecasts

Daily Analysis - 17/05/2016

The Confederation of British Industry’s 2016 Growth Outlook

In light of the upcoming EU membership referendum due on June 23, Britain's business lobby cut 2016 growth outlook calling it a "dark cloud of uncertainty." CBI expects UK's GDP to rise 2.00% this year and the next, in line with the BoE's revised GDP forecasts.

Japan PPI Posts Biggest Decline in 6 Years

Data released on Monday from the Bank of Japan showed that Japan's producer price index fell -4.20% on a year over year basis, marking the biggest drop in over six years since November 2009's -5.00% declines. PPI fell on slower global and domestic demand. On a month over month basis, producer prices fell -0.30% in April, falling for the 11^th month in a row. The declines were seen in falling costs for chemicals, nonferrous metals and communication equipments. The data comes ahead of the first quarter GDP numbers due for release on Wednesday, which is expected to show a 0.30% increase in annualized GDP while rising 0.10% in the first three months of the year

NY Fed Empire State Manufacturing Index falls to a 3 Month Low

Data from the New York Federal Reserve released on Monday showed the manufacturing index unexpectedly turning negative in May and falling to a 3-month low. Business conditions among manufacturers in New York fell to -9.00 in May reversing the 9.56 increase in April and missing estimates of a 7.20 reading. The unexpected decline was the biggest since the October 2014 market crash. New orders fell to their lowest levels since February, falling to 5.54 in May compared to 11.14 in April. However, employment in the sector was modestly better, rising to 2.08 in May compared to 1.92 in April.

UK CPI Expected to Remain Soft

Inflation data from the UK for the month of April will be released today at 0830 GMT. Economists forecast a slowdown in the consumer price index, with expectations of a 0.30% increase in April, down from 0.40% in March on a month over month basis. On a year over year basis, CPI is expected to rise at 0.50%, the same pace as the previous month. Excluding food and energy, the core CPI is expected to rise 1.40%, slower than the 1.50% increase in March. The Bank of England's inflation report released last week showed that the central bank already expects a slower inflation in the coming months and therefore any miss on the estimates is unlikely to see strong reaction from the pound.

Busy Day for the US Dollar

Economic data from the US will be busy today starting with April CPI data due at 1230 GMT. Expectations are for an increase in CPI to 0.40% on a month over month basis, while on a year over year basis, US inflation is expected to rise 1.0% on the headline and 2.20% on the core. Housing starts and building permits will also be released simultaneously and is expected to show a recovery with housing starts expected to rise 3.30% in April after falling 8.80% in March, while building permits is expected to rise 5.50% after March's 7.70% declines. Industrial production data will be coming out later at 1315 GMT. Winding up the day, Fed members Williams, Lockhart and Kaplan will be speaking.