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JPM Global Data Watch Ep 2022-05-14 4094381
JPM Global Data Watch Ep 2022-05-14 4094381
weighing heavily on its domestic demand and adding to global supply chain Morgan Economics 9
J.P. Morgan Market Watch 10
pressures. In response, we have materially altered 1H22 forecasts to show a
worsening growth-inflation trade-off (Figure 1). We have lowered our global Data Watches
United States 27
GDP forecast by 2.5%-pts since the start of the year, to a sub-par 1.7%ar. The Euro area 33
upward revision to inflation is more substantial: we now project CPI inflation Japan 37
(ex. Turkey) to reach an unprecedented 7.8%ar during 1H22. Canada 41
Mex ico 43
Global growth is being dented, but we continue to forecast a return to above- Brazil 45
potential GDP gains in 2H22. This view largely is based on the judgment that Argentina 47
Andeans 49
the private sector is in an unusually strong position to cushion these blows and United Kingdom 51
limit their spread. The evidence on this front has been encouraging. The dra- Emerging Europe 55
matic squeeze on household purchasing power from higher inflation has been South Africa 59
tempered by DM households’ willingness to draw down a large reservoir of Australia and New Zealand 61
excess savings: the US household saving rate is projected to have fallen by 2%- China, Hong Kong, and Taiw an 63
Korea 67
pts in 1H22, a drop that boosts consumption gains by more than 4%-pts annual- ASEAN 69
ized. Households’ constructive behavior has been supported by continued strong India 73
hiring and spending by firms with record-high profits margins and a strong de- Regional Data Calendars 75
sire to rebuild depleted inventories. Following on continued strength in payroll Our Special Report "Liv ing w ith COVID-19" w as
growth, we expect next week’s US April releases to reinforce this message of published on May 9, and is now av ailable on our
resiliency with strong gains in retail spending (1.5%m/m) and IP (0.5%m/m). w ebsite.
This forecast will require more than these cushions in order to be realized, how-
ever. As we move through midyear, the drags also need to fade. We expect
global commodity price pressures to stabilize, contributing to a sharp decelera-
tion in global inflation. We also expect a 1H22 COVID drag to transition into a
2H22 normalization lift as China contains the virus and as widespread progress
toward an endemic equilibrium gathers steam.
Figure 1: J.P. Morgan 2022 global forecast Figure 2: Crude oil price and crack spread Bruce Kasman
% change saar; forecast by date made $/bbl; both scales (1-212) 834-5515
Crack spread bruce.c.kasman@jpmorgan.com
9 CPI 1H 180 Crude oil price (NYMEX WTI) 60 JPMorgan Chase Bank NA
(WTI) 50
7 140
40 Joseph Lupton
(1-212) 834-5735
5 GDP 2H 100 30 joseph.p.lupton@jpmorgan.com
20 JPMorgan Chase Bank NA
3 60
10
CPI 2H GDP 1H Michael S Hanson
1 20 0
Jan Feb Mar Apr May (1-212) 622-8603
07 09 11 13 15 17 19 21 23
michael.s.hanson@jpmchase.com
Source: J.P. Morgan Global Economics Source: Bloomberg Finance, L.P., J.P. Morgan
JPMorgan Chase Bank NA
www.jpmorganmarkets.com
This document is being provided for the exclusive use of Kurt Zhang at Huatai Financial Holdings (Hong Kong) Limited.
JPMorgan Chase Bank NA Economic Research
Bruce Kasman (1-212) 834-5515 Michael S Hanson (1-212) 622-8603 Global Data Watch
bruce.c.kasman@jpmorgan.com michael.s.hanson@jpmchase.com May 13, 2022
Joseph Lupton (1-212) 834-5735
joseph.p.lupton@jpmorgan.com
Finally, the continued hawkish pivot by global central banks Source: National sources, J.P. Morgan
This document is being provided for the exclusive use of Kurt Zhang at Huatai Financial Holdings (Hong Kong) Limited.
JPMorgan Chase Bank NA Economic Research
Bruce Kasman (1-212) 834-5515 Michael S Hanson (1-212) 622-8603 Global Data Watch
bruce.c.kasman@jpmorgan.com michael.s.hanson@jpmchase.com May 13, 2022
Joseph Lupton (1-212) 834-5735
joseph.p.lupton@jpmorgan.com
increases in the 3%-5%m/m range. In Romania, an energy Bank of Japan: Lonesome dove
CPI spike (26%m/m) was an additional source of pressure.
Next week core inflation in Japan will turn positive for the
As a result, we have revised our terminal rate forecasts up-
first time in a year, rising 0.2%oya, largely on the fading of
ward for a number of central banks: to 8.5% for the NBH,
negative base effects. Japan’s official core (excluding fresh
8% for the NBR, and 7% for the CNB. In Poland we main-
food but including energy) should rise 0.3% in April, lifting
tain a peak rate of 6.5% but risks are skewed to the upside.
the inflation rate to 1.9%. Buoyed by higher food and energy
prices, this measure should remain around 2% toward the end
At its last meeting, South Africa’s MPC debated the degree
of this year. However, the BoJ has shown no inclination to
to which its inflation exceptionalism will persist in an envi-
shift from its stance. The April minutes revealed that Board
ronment of high global inflation and a multiplicity of
members did not believe that 2% inflation would be sustained,
shocks. Concern that the current run of low readings will
and expressed no concern about the rapid depreciation of the
come to an end is building, and two developments since
yen. There was no discussion of adjusting the yield curve con-
March—substantially higher food inflation and rand weak-
trol policy. Recent market moves have reduced political pres-
ness—are likely to turn the tide toward a 50bp increase next
sure on the BoJ, and we think it will take some time to see the
week. We believe a further 50bp hike is also likely at the
rises in medium-term inflation expectations and wage growth
subsequent meeting in July. We expect inflation to peak at
needed for the BoJ to pivot toward policy normalization.
7.2% in October and see repo rates rising to 6.75% by mid-
2023.
Painful echoes of Brexit, again
For EM Asia outside China, growth is likely to be buffeted Unionists have long been opposed to the Protocol for North-
by cross-currents for the rest of this year. China-related ern Ireland put in place as the UK left the EU, which effec-
trade drags are being offset by the relaxation of COVID re- tively places a regulatory and customs border in the Irish Sea.
strictions as the region moves toward an endemic equilibri- They are now refusing to take their place in Northern Ire-
um. The net impact should be neutral to slightly negative land’s power-sharing institutions, demanding that the protocol
for growth. But we also expect it to generate higher core in- be removed. The UK government has hinted at a range of
flation concentrated in the domestic services sector. Thus, unilateral actions it could take, which the EU sees as a sign
even though we have penciled in some easing in headline the UK never intended to implement the protocol properly.
inflation as energy prices stabilize, we expect that core in- The situation potentially calls the whole UK-EU trade settle-
flation could continue to rise over much of this year. Cen- ment into question. However, once the UK takes unilateral
tral banks are likely to tighten in this environment and we action, we expect a proportionate response by the EU that
expect the Philippines’ BSP to hike 25bp next week. pursues legal remedies alongside limitations on a small subset
of UK exports. Although a tit-for-tat escalation cannot be en-
Despite the relatively balanced tone of Brazil’s May CO- tirely ruled out, we anticipate an uncomfortable disagreement
POM minutes, we still see the central bank hiking an addi- that persists for the foreseeable future.
tional 50bp in June. Risks remain tilted to more on the back
of recent news showing firmer activity and inflation. March
retail sales and services output prompted us to revise up our
1Q GDP estimate and inflation remains relentless, with the
highest April core print since 2003. We see upside risks to
our higher-than-consensus call that inflation will end 2022
at 9.1%. In Mexico, Banxico hiked 50bp to 7% this week,
as expected, while revising up its inflation forecast for
4Q22 to 6.4% (J.P. Morgan: 6.9%). Despite the hawkish
tone of the statement that leaves open the possibility of ac-
celeration, we forecast 50bp hikes at both the June and Au-
gust meetings. In Peru, the BCRP continues with a steady
50bp hiking pace, reaching 5% at this week’s meeting.
Even though core inflation is somewhat better-behaved in
Peru, inflation expectations are still deteriorating—perhaps
exacerbated by risk of another pension fund withdrawal.
Our forecast is for two more hikes to reach 6% by July.
This document is being provided for the exclusive use of Kurt Zhang at Huatai Financial Holdings (Hong Kong) Limited.
JPMorgan Chase Bank NA Economic Research
Carlton Strong (1-212) 834-5612 Global economic outlook sum-
carlton.m.strong@jpmorgan.com mary
Joseph Lupton (1-212) 834-5735 May 13, 2022
joseph.p.lupton@jpmorgan.com
United States 5.7 2.8 2.3 6.9 -1.4 3.3 3.5 2.5 2.5 6.7 8.0 6.3 ↑ 3.4↑
Canada 4.6 4.2 2.8 6.7 5.0 3.5 3.5 3.0 2.8 4.7 6.3 ↑ 5.4 ↑ 2.2
Latin America 6.6 2.1 ↑ 1.4 3.7 3.5 ↑ -0.2 -0.1 0.6 1.7 8.3 10.1 ↓ 8.2 5.1 ↑
Argentina 10.3 3.0 1.8 6.3 5.0 -4.5 -2.0 1.0 3.0 51.4 59.5 ↑ 68.9 ↑ 60.1 ↑
Brazil 4.6 1.0 ↑ 0.6 2.2 4.2 ↑ 0.0 -1.8 -1.2 1.2 10.5 12.0 ↓ 9.4 ↑ 6.0↑
Chile 11.7 2.5 0.8 7.5 -1.8 -3.0 -2.0 0.0 2.0 6.6 11.3 8.3 4.6
Colombia 10.6 6.5 3.0 18.2 3.0 0.0 2.5 3.0 3.0 5.2 9.3 8.7 5.4
Ecuador 4.2 3.1 2.5 2.9 3.5 2.5 2.0 3.0 2.7 1.8 3.1 2.7 1.5
Mexico 4.8 1.9 1.7 0.1 3.6 1.6 2.0 1.8 1.3 7.0 7.9 7.0 4.2
Peru 13.3 2.5 2.3 2.6 2.3 -1.8 1.6 2.4 2.5 6.0 7.9 5.5 3.5
Uruguay 4.4 4.4 2.8 8.3 1.0 1.5 1.0 3.0 1.0 7.9 9.7 8.3 5.6
Asia/Pacific 6.2 4.1 4.2 7.6 ↓ 4.8 ↑ 1.4↓ 4.4 ↓ 5.5 4.2 2.1 3.1 ↑ 3.4 ↑ 2.5↓
Japan 1.7 2.1 ↑ 1.8 4.6 0.3 ↑ 4.0 3.5 2.5 1.0 0.5 1.8 2.1 1.4
Australia 4.7 3.4 2.7 14.4 1.9 3.1 2.6 3.3 2.4 3.5 5.2 4.6 2.8
New Zealand 5.6 3.3 2.9 12.6 3.8 3.5 4.1 2.9 2.5 5.9 6.9 4.4 2.3
EM Asia 7.3 4.6 ↓ 4.8 ↓ 7.8 ↓ 6.0 ↑ 0.7↓ 4.7 ↓ 6.3 5.0 2.4 3.2 ↑ 3.7 ↑ 2.7↓
China 8.1 4.3 ↓ 5.2 7.5 6.8 -1.5↓ 4.9 7.3 5.5 1.8 2.3 ↑ 3.0 ↑ 2.4↓
India 8.7 7.1 5.1 7.3 6.0 7.0 5.0 5.0 5.3 5.0 6.3 6.4 5.6
Ex China/India 4.5 4.2 3.8 ↓ 8.9 ↓ 4.0 ↑ 3.6↓ 4.2 ↓ 4.0 ↓ 3.6 ↑ 2.9 4.3 4.2 2.2
Hong Kong 6.3 -0.5 3.9 0.0 -11.5 ↓ 6.2 7.0 6.5 2.4 2.0 1.7 1.8 1.5
Indonesia 3.7 4.9 4.9 14.0 ↑ 3.5 ↓ 5.2 4.9 4.8 5.0 1.8 3.3 4.8 3.3
Korea 4.0 3.0 2.5 ↑ 5.0 3.0 2.0 3.5 3.2 2.0 3.5 4.7 4.0 2.0
Malaysia 3.1 8.3 5.7 19.7 ↓ 16.4 ↑ 4.0↓ 3.0 ↓ 3.0 ↓ 6.0 ↑ 3.2 2.9 3.3 2.3
Philippines 5.7 ↑ 9.6 6.1 ↓ 14.7 ↑ 7.6 ↑ 8.5↓ 5.5 ↓ 5.5 ↓ 6.5 ↑ 3.6 ↓ 5.2 5.0 2.4
Singapore 7.6 4.9 4.9 9.5 6.0 5.0 4.5 4.5 4.5 3.7 6.5 6.2 2.6
Taiwan 6.4 3.7 3.0 7.6 6.4 0.7 2.8 3.2 3.2 2.7 3.2 2.9 2.0
Thailand 1.6 3.0 3.3 7.5 3.4 2.7 4.1 3.7 3.2 2.4 6.8 5.3 0.9
Western Europe 5.7 3.2 2.4 ↓ 2.0 ↓ 1.0 ↓ 2.0↓ 2.6 2.3 2.7 ↓ 4.6 7.8 6.8 2.5
Euro area 5.4 3.1 2.8 1.2 0.8 2.3 3.0 2.8 3.0 4.6 7.7 6.7 2.2
Germany 2.9 3.0 3.5 -1.4 0.8 5.0 4.5 3.0 3.5 5.4 8.0 6.5 1.8
France 7.0 3.0 2.8 3.2 -0.2 1.0 2.0 2.5 3.5 3.3 5.7 5.2 2.0
Italy 6.6 2.8 2.3 2.7 -0.7 1.0 2.0 2.5 2.5 3.7 7.6 7.0 2.3
Spain 5.1 4.4 3.2 9.2 1.3 1.0 3.0 3.5 3.5 5.8 8.7 7.5 2.6
Norway 4.2 3.8 ↓ 2.7 5.6 ↓ -2.4 ↓ 5.5 4.0 3.0 2.3 3.4 4.7 2.8 1.8
Sweden 4.6 2.3 1.6 4.6 -1.6 1.8 2.0 1.8 1.5 3.3 6.2 6.1 3.2
United Kingdom 7.4 3.7 ↓ 1.1 5.2 3.0 ↓ 0.5 ↓ 0.6 0.3 1.6 ↓ 4.9 8.6 7.6 3.7
EMEA EM 6.4 0.5 1.8 7.5 1.9 ↑ -9.9 -2.4 ↓ 3.7 3.8 10.3 23.9 ↑ 21.8 ↑ 8.7↑
Czech Republic 3.3 3.1 2.5 3.2 2.8 0.8 2.0 2.5 2.8 6.1 15.2 ↑ 14.3 ↑ 5.8↑
Hungary 7.1 5.4 ↑ 2.7 ↓ 8.1 8.0 ↑ 3.0↑ 1.0 ↓ 2.0 ↓ 3.0 ↓ 7.1 9.7 ↑ 10.8 ↑ 6.9↑
Israel 7.9 6.1 3.7 17.6 1.6 2.0 2.2 3.6 4.5 2.5 3.9 3.7 2.3
Poland 5.9 5.4 2.9 6.6 8.3 0.0 1.8 2.8 3.3 7.7 13.8 ↑ 13.4 ↑ 10.3↑
Romania 6.0 3.4 5.6 -0.4 7.0 3.6 4.1 5.3 6.1 8.0 14.4 ↑ 14.3 ↑ 9.6↑
Russia 4.7 -6.0 -1.0 8.3 -2.0 -30.0 -10.0 5.0 4.0 8.3 18.5 17.7 6.5
South Africa 4.9 1.9 1.8 4.7 3.7 ↑ 1.5 1.8 2.2 1.9 5.4 6.4 ↑ 6.9 5.3↓
Turkey 11.0 3.2 3.9 6.2 0.4 0.0 0.8 2.8 4.1 25.8 72.3 61.5 18.4
Global 5.9 3.2 ↓ 3.0 6.0 2.1 ↑ 1.4↓ 3.2 3.6 3.2 4.7 7.0 ↑ 6.2 ↑ 3.2
Developed markets 5.2 2.9 2.3 5.1 0.0 ↑ 2.9 3.1 2.5 2.4 5.1 7.1 5.9 2.8 ↑
Emerging markets 7.1 3.7 ↓ 4.0 7.3 5.1 ↑ -0.9↓ 3.2 5.2 ↓ 4.5 ↑ 4.1 6.9 ↑ 6.7 ↑ 3.8↓
Emerging ex China 6.2 3.2 2.9 7.0 ↓ 3.6 ↑ -0.3↓ 1.5 ↓ 3.3 ↓ 3.5 6.4 11.2 ↑ 10.2 ↑ 5.2↑
Global — PPP weighted 6.3 3.7 3.4 6.3 2.8 ↑ 0.4↓ 2.8 ↓ 3.9 3.6 4.9 ↓ 7.9 ↑ 7.2 ↑ 3.7
Source: Government agencies and J.P. Morgan Global Economics. Details on request. Note: For some emerging economies seasonally adjusted GDP data are estimated by J.P.
Morgan. Bold denotes changes from last edition of Global Data Watch, with arrows showing the direction of changes. Underline indicates beginning of J.P. Morgan forecasts. Unless
noted, concurrent nominal GDP weights calculated with current FX rates are used in computing our global and regional aggregates. Regional CPI aggregates exclude Argentina and
Ecuador. Source: J.P. Morgan. Any long-form nomenclature for references to China; Hong Kong; and Taiwan within this research material is Mainland China; Hong Kong SAR (Chi-
na) and Taiwan (China).
This document is being provided for the exclusive use of Kurt Zhang at Huatai Financial Holdings (Hong Kong) Limited.
JPMorgan Chase Bank NA Economic Research
Carlton Strong (1-212) 834-5612 Global Data Watch
carlton.m.strong@jpmorgan.com May 13, 2022
Joseph Lupton (1-212) 834-5735
joseph.p.lupton@jpmorgan.com
This document is being provided for the exclusive use of Kurt Zhang at Huatai Financial Holdings (Hong Kong) Limited.
JPMorgan Chase Bank NA Economic Research
Joseph Lupton (1-212) 834-5735 Global Central Bank Watch
joseph.p.lupton@jpmorgan.com May 13, 2022
Carlton Strong (1-212) 834-5612
carlton.m.strong@jpmorgan.com
Source: Government agencies and J.P. Morgan Global Economics. Details on request. 1 BoJ sets the policy rate on IOER (O/N) and targets 10-year JGB yields as policy guidance. 2 RBI raised the lower
end of the policy corridor 40 bps Apr22. Repo rate represents mid-point of policy corridor. Bold denotes move since last GDW and forecast changes. Underline denotes policy meeting during upcoming
week. Aggregates are GDP-weighted averages. Any long-form nomenclature for references to China; Hong Kong; and Taiwan within this research material is Mainland China; Hong Kong SAR (China) and
Taiwan (China).
6
This document is being provided for the exclusive use of Kurt Zhang at Huatai Financial Holdings (Hong Kong) Limited.
JPMorgan Chase Bank NA Economic Research
Joseph Lupton (1-212) 834-5735 Global Data Watch
joseph.p.lupton@jpmorgan.com May 13, 2022
Bennett Parrish
bennett.parrish@jpmchase.com
Nowcast global GDP: Aligned growth are more balanced in DM and EM Asia (Figure 3 and
Table 1).
after China downgrade Figure 3: Risk bias, 2Q22
%-pts. Nowcast minus forecast
This week we once again lowered our forecast for 2Q global
GDP growth owing to a large downgrade to China. We now 10 Rus: +29
8
look for global GDP to grow at a below-potential 1.4%ar this
6
quarter, with a 1.5%ar contraction in China. Our forecast for 4
2Q real GDP growth in China has plunged 7.2%-pts since 2
early April. Somewhat surprisingly, 2Q GDP growth revi- 0
sions outside of China have moved in the opposite direction: -2
-4
we have revised up the rest of the world by 0.9%-pt over the -6
same time period. Normally, a large growth cut to China has a
Rus
Bra
Mex
Zaf
DM
EM
EMEA EM
Chl
Col
Per
Pol
Twn
Kor
UK
Chn
EMU
Jpn
Tur
Glob
US
EM Asia
Latam
Glob,wt
negative impact on GDP elsewhere, but we see resilience
from strong demand fundamentals and reopening dynamics Source: J.P. Morgan Global Economics. Note: Not all nowcasters shown
This document is being provided for the exclusive use of Kurt Zhang at Huatai Financial Holdings (Hong Kong) Limited.
JPMorgan Chase Bank NA Economic Research
Joseph Lupton (1-212) 834-5735 Nowcast global GDP
joseph.p.lupton@jpmorgan.com May 13, 2022
Bennett Parrish
bennett.parrish@jpmchase.com
resilience of our GDP growth forecasts outside of China, Figure 6: Euro area real GDP, 1Q22 JPM forecast
where we have cut 2Q growth by 7.2%-pts. Our VAR analysis %q/q, saar
suggests cutting China’s growth 7.2%-pts amounts to about JPM nowcast
an 0.8%-pt spillover to the rest of the world, yet activity data 4
Mar 04
Mar 11
Mar 18
Mar 25
Apr 01
Apr 08
Apr 15
Apr 22
Apr 29
Feb 04
Feb 11
Feb 18
Feb 25
May 06
May 13
May 20
%ch, sa (ar for qrt). PMIs are levels. Confidence is std.dev from 2010-pres avg
1Q22 2Q22 Mar22 Apr22 May22 Jun22 Source: J.P. Morgan Global Economics
PMI, mfg 51.5 48.6 50.9 48.5 48.5 48.9
PMI, serv 52.8 51.9 53.4 51.9 51.9 52.0
IP 6.4 -2.1 -0.2 -0.5 -0.3 0.0 Figure 7: EM Asia real GDP, 1Q22 JPM forecast
Retail sales -1.8 -2.7 -1.4 0.2 0.0 0.1 %q/q, saar
Auto sales
JPM nowcast
38.4 -52.4 -11.0 -13.0 1.0 0.8
8
G-3 cap. ship. 11.7 -5.1 -0.6 0.0 -0.5 -0.3
G-3 cap. orders 0.9 -5.7 -0.1 -0.2 -0.7 0.1
6
Cap. exports 22.8 6.7 -2.4 1.6 0.1 -0.3
Bus conf 0.5 -0.5 -0.1 -0.4 -0.5 -0.5 4
Cons conf -0.5 -0.9 -1.0 -0.9 -0.9 -0.8
Nowcast (ar) 3.3 1.5 0.8 1.3 1.3 1.6 2
Note. Shaded values show forecasts computed by the Kalman filter estimates from the dynam-
ic factor model. Underlined values are our estimates based on available data and our judg-
ment. Source: J.P. Morgan Global Economics, Markit, and national statistical agencies. 0
Feb 04
Feb 11
Feb 18
Feb 25
Mar 04
Mar 11
Mar 18
Mar 25
Apr 01
Apr 08
Apr 15
Apr 22
Apr 29
May 06
May 13
May 20
Figure 4: Global real GDP, 1Q22 Source: J.P. Morgan Global Economics
JPM forecast
%q/q, saar JPM Global nowcast
Nowcast, wghtd avg Figure 8: Latam real GDP, 1Q22
5 JPM forecast
%q/q, saar
4
4 JPM nowcast
3
3
2
1 2
0 1
Feb 04
Feb 11
Feb 18
Feb 25
Mar 04
Mar 11
Mar 18
Mar 25
Apr 01
Apr 08
Apr 15
Apr 22
Apr 29
May 06
May 13
May 20
0
Feb 04
Feb 11
Feb 18
Feb 25
Mar 04
Mar 11
Mar 18
Mar 25
Apr 01
Apr 08
Apr 15
Apr 22
Apr 29
May 06
May 13
May 20
Source: J.P. Morgan Global Economics
-4
Feb 04
Feb 11
Feb 18
Feb 25
Mar 04
Mar 11
Mar 18
Mar 25
Apr 01
Apr 08
Apr 15
Apr 22
Apr 29
May 06
May 13
May 20
*For a primer on our nowcaster suite, see methodology report and podcast.
This document is being provided for the exclusive use of Kurt Zhang at Huatai Financial Holdings (Hong Kong) Limited.
JPMorgan Chase Bank NA Economic Research
Bruce Kasman (1-212) 834-5515 Michael S Hanson (1-212) 622-8603 Global Data Watch
bruce.c.kasman@jpmorgan.com michael.s.hanson@jpmchase.com May 13, 2022
Joseph Lupton (1-212) 834-5735
joseph.p.lupton@jpmorgan.com
This document is being provided for the exclusive use of Kurt Zhang at Huatai Financial Holdings (Hong Kong) Limited.
J.P. Morgan Securities LLC J.P. Morgan Securities plc Economic Research
Marko Kolanovic, PhD (1-212) 622-3677 Nikolaos Panigirtzoglou (44-20) 7134-7815 Global Data Watch
marko.kolanovic@jpmorgan.com nikolaos.panigirtzoglou@jpmorgan.com May 13, 2022
Bram Kaplan, CFA (1-212) 272-1215 Federico Manicardi (44-20) 7742-7008
bram.kaplan@jpmorgan.com federico.manicardi@jpmorgan.com
J.P. Morgan Market Watch dip, we would recommend: i) liquid indices, such as QW5A
or iTraxx Main; ii) corporate hybrids; and iii) REITS. We
Bonds think the risk-reward is becoming more balanced, but it is still
too early to call the wide in spreads. Last week, we offered
Bonds reversed much of the previous week’s sell-off amid three criteria for turning more constructive on euro credit
renewed growth/recession concerns and increased concerns markets: i) equity and rates volatility declining; ii) primary
over Russian gas supplies to Europe. In the US, the increased markets returning to normal functioning; and iii) retail funds
sensitivity of USTs to risk assets, some softness in activity seeing inflows. In our view, we have still seen far too little
data, and only a modest undershoot in market pricing of Fed progress on these factors to turn outright bullish on credit risk
hikes relative to our forecast keeps us tactically neutral on (European Credit Weekly, May 13).
outright duration. Instead, we prefer to position for higher
yields in the medium term via more carry-efficient 5s/20s
Figure 1: Year-to-date returns
flatteners. %
Commodities 29
In the Euro area, the headwinds posing a resiliency test for MSCI Brazil ($) 9
USD trade-wtd 6
the outlook have stiffened, and markets are showing signs of FTSE 0
USD 3M cash 0
accepting that the Russia-Ukraine conflict is a disproportion- Euro linkers -1
JGBs -2
ate shock to the Euro area economy. We stay long 5Y Germa- US Lev Loans -2
Australia equities -5
ny vs. US and stay short 3Mx5Y EUR payer gamma. Intra- Topix -6
US linkers -7
EMU, we stay short 10Y Italy vs. Germany. In the UK, de- GBI Global -7
Euro HG credit -8
spite the recent rally, the market implied rate in mid-2023 at US Treasuries -8
EMU Bonds -8
2.3% remains excessive given mounting growth risks, and we S&P500 Value -8
Euro HY credit -8
continue to receive 5Y SONIA vs. 5Y USD OIS. US HY credit -10
EM Bonds (GBI-EM) -10
EM FX (ELMI) -10
In EM, the environment for fixed income remains challenging EM Corporates -12
US HG credit -12
given tightening financial conditions and a slowing China. MSCI India ($) -13
EM Sovereigns -16
We stay short local duration given continued upward revi- MSCI EMU -16
S&P500 -16
sions to inflation and rising global terminal rates. We are UW S&P500 Momentum -16
EM Frontier Sovs -17
Malaysia and Thailand in EM Asia, Hungary, Poland, and S&P500 Quality -17
Convertibles -18
Romania in EMEA EM, and Chile and Colombia in Latam MSCI ACWI -18
MSCI EM (in $) -20
(EMOS, May 9th) Russell 2000 -21
MSCI Korea ($) -22
Nasdaq -25
S&P500 Growth -26
Credit MSCI China ($) -26
US HG spreads remain below the March peak even as -30 -25 -20 -15 -10 -5 0 5 10 15 20 25 30 35
equity markets and other risky assets are much weaker. Source: J.P. Morgan Global Economics
We see two drivers of this: higher yields and less supply. The
supply trend between March and May is quite different as The risk backdrop has become increasingly difficult for
well. In March US$234bn was issued, while in contrast there EM sovereigns. However, what has and should continue to
has been only US$30bn of supply through May 10. Would cushion EM credit is a combination of front-loaded pain and
yields be higher or lower in a recession? In all of the selloffs cleaner technicals. The EMBIGD began repricing well before
over the past 10 years yields were never higher than they are other credit markets, and positioning has been lightened with
now. This includes the COVID selloff in Mar’20, the energy higher-than-average cash balances. The average bond price in
rout in Feb’16 and the various selloffs around the Euro crisis the EMBIGD is now below COVID lows registered in early
in 2011-2012. Spreads were meaningfully wider in those peri- 2020, and among the C-rated bucket, bond prices currently
ods of weakness but yields were not higher. The non-Financial average 36, sitting on the lower end of historical recovery
10s30s spread curve has flattened by 9bp since the beginning of values for EM sovereigns. Oil exporter outperformance looks
April and is currently around 30bp, a level that has not been to have run its course, in our view, and we dial back some of
breached for most of the past decade (CMOS, May 13). our oil exposures. Stay MW the EMBIGD (EM Sovereign
Credit Strategy, May 9).
In Europe, we are neutral at current levels, and prefer to
focus on RV trades including: i) HY / IG decompression; ii) Currencies
corporate hybrids over HY; and iii) OW Financials vs Non- Our long USD strategy in recent months has been in-
Financials. For investors looking to more aggressively buy the formed by the regime of soft growth-high inflation, com-
10
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J.P. Morgan Securities LLC J.P. Morgan Securities plc Economic Research
Marko Kolanovic, PhD (1-212) 622-3677 Nikolaos Panigirtzoglou (44-20) 7134-7815 Global Data Watch
marko.kolanovic@jpmorgan.com nikolaos.panigirtzoglou@jpmorgan.com
May 13, 2022
Bram Kaplan, CFA (1-212) 272-1215 Federico Manicardi (44-20) 7742-7008
bram.kaplan@jpmorgan.com federico.manicardi@jpmorgan.com
bined with rising US real yields. Macro conditions in the knock-on impact on demand remain the top concern driving
past month have become even more conducive to a bullish the sharp selloff (Metals Weekly, May 13th).
USD view. The growth slowdown has broadened with even
the US not immune, and China spillovers to the rest of the The USDA’s May WASDE detailed an outlook of persis-
world are a risk, with the Eurozone more vulnerable. This tent draws in world 2022/23 wheat, corn and cotton inven-
macro deterioration is coming amid substantially shallower tories, while soybeans are likely to build. Wheat markets led
liquidity in macro markets and increased USD scarcity and the post-report gains after earlier de-risking. We remain con-
warrants increasing defensive exposure and marking down structive on the complex and we see upside for prices through
key FX forecasts. We stay long dollar and defensive (short 2Q22, particularly for wheat and corn (Agricultural Markets
EM). The primary change has been that we had substantially Weekly, May 13).
cut commodity FX longs in recent weeks.
JPM Forecasts
Broad-dollar forecasts are upped by an average of 4% Rates Current Jun-22 Sep-22 Dec-22 Mar-23
US (SOFR) 0.79 1.05 1.85 2.45 2.95
across the forecast horizon. Key FX target changes include:
10-year yields 2.91 3.05 3.15 3.20 3.25
EUR/USD 3Q22 at 1.00 (prior 1.05). Cable 3Q 1.14 (from Euro area (depo) -0.50 -0.50 0.00 0.25 0.50
1.27) on recession risk. USD/CNY 6.95 (prior 6.80). 10-year yields 0.94 0.85 0.80 0.75 0.80
EUR/CHF 1y 1.02 (from 1.03) (KCV, May 13th). Italy-Germany 10Y (bp) 192 160 170 180 180
Spain-Germany 10Y (bp) 106 85 90 95 95
United Kingdom (repo) 1.00 1.25 1.50 1.75 2.00
Commodities 10-year yields 1.73 1.80 1.90 1.95 2.00
Japan (call rate) -0.10 -0.10 -0.10 -0.10 -0.10
Global crude runs enough to keep fuel prices from climb- 10-year yields 0.24 0.20 0.20 0.20 0.25
ing higher, but not enough to fix market before 2023. We EM Local (GBI-EM yield) 7.03 6.52
Currencies Current Jun-22 Sep-22 Dec-22 Mar-23
expect global refinery throughput to increase 2.6 mbd yoy in JPM USD Index 129 130 131 132 132
2022, matching the increase in global oil demand. While we EUR/USD 1.04 1.02 1.00 1.01 1.02
think this pace of runs is sufficient to stop draws from global USD/JPY 129 130 131 132 133
diesel inventories, diesel stocks are unlikely to recover to GBP/USD 1.22 1.18 1.14 1.15 1.16
AUD/USD 0.69 0.69 0.71 0.73 0.75
normal levels before the end of the year. If global refiners are USD/CNY 6.80 6.85 6.90 6.95 6.95
unable to increase runs, the market will be left with only one USD/KRW 1284 1270 1290 1310 1330
balancing tool: further demand destruction. USD/MXN 20.19 20.90 21.20 21.40 21.60
USD/BRL 5.12 5.00 5.20 5.30 5.30
USD/TRY 15.47 16.50 17.50 18.50 19.50
Even as Brent prices fell from highs, fuel prices have re- USD/ZAR 16.22 16.00 16.25 16.50 16.75
mained high. A combination of low inventory levels, low Commodities Current Jun-22 Sep-22 Dec-22 Mar-23
refining capacity, and still-recovering demand drove fuel Brent ($/bbl, qtr end) 111 104 104 101 95
WTI ($/bbl, qtr end) 109 101 101 98 91
prices up with crude oil in late February and up further since Gold ($/oz, qtr avg) 1,805 1,850 1,800 1,720 1,670
then. Last week, US diesel fuel inventories fell to their lowest Copper ($/ton, qtr avg) 9,105 10,650 10,000 9,750 9,400
levels in 17 years while Gasoil inventories in Europe are near Aluminum ($/ton, qtr avg) 2,712 3,550 3,300 2,900 2,850
Iron ore (US$/dt, qtr avg) 131 150 140 125
the lowest levels in more than a decade. With supply from Wheat ($/bu, qtr avg) 11.7 15.0 14.0 12.0 11.5
Russian refiners off-limits for European consumers, insuffi- Soybeans ($/bu, qtr avg) 16.3 18.5 17.0 16.0 15.5
cient local capacity and the US and Canada unlikely to bridge
Credit Current Dec-22
the diesel supply gap, European refiners need to look to other
US High Grade (bp over UST) JPM JULI 168 125
regions. If Middle East refiners can shift some of their 300- Euro High Grade (bp over Bunds) iBoxx HG 188 175
400 kbd of Asia-bound diesel flows toward the Atlantic, they US High Yield (bp vs. UST) JPM HY 513 350
may be able to keep European and US East Coast fuel mar- US Lev Loans (bp vs. 3Y Index) JPM Lev Loans 551 380
Euro High Yield (bp over Bunds) iBoxx HY 551 525
kets from drifting further into crisis. In China, cuts to fuel EM Sovereigns (bp vs. UST) JPM EMBIGD 474 350
export quotas limit the country’s ability to deliver the fuel the EM Corporates (bp vs. UST) JPM CEMBI 343 260
rest of the world needs (Oil Weekly May 13). Source: J.P. Morgan, Bloomberg Finance L.P., Datastream
11
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J.P. Morgan Securities plc Economic Research
Raphael Brun-Aguerre (44-20) 7134-8308 Euro area: Tracking consumer oil
raphael.x.brun-aguerre@jpmorgan.com prices
May 13, 2022
Beyond the near term, we expect Euro area energy price Together, fuel for transport and heating oil prices represent
inflation to decline sharply and turn negative in 2H23 about 5% of the HICP basket and about half of the energy
basket. More specifically, fuel for transport represents 4.4%
Energy prices have been the main driver of headline inflation of the HICP basket while heating oil represents 0.7% of the
since 2021. And within energy prices, oil prices have played a HICP basket. Both are strongly correlated with Brent prices.
significant role. Historically, there has been a tight relation- Figure 2 shows that the price of Brent of is a significant driv-
ship between the price of Brent and HICP fuel prices (for ers of energy price inflation. Since the autumn, a significant
transport and heating), but in the last two years this relation- portion of energy price inflation is not explained by Brent.
ship has been challenged: our model suggested larger swings This part is linked to the rise in gas and electricity prices.
in consumer fuel prices than actually occurred after the start
Figure 2: Euro area HICP energy prices and Brent prices
of the COVID-19 pandemic and then failed to capture the
2015=100 €/barrel
strong increase seen in March this year. Going forward, this
relationship also will not capture consumer price changes 160 150
Brent 130
linked to lower taxes and excise duties as governments try to HICP energy
140 110
offset higher Brent prices for consumers. As an alternative to
our model to track HICP prices, we present useful weekly 90
120
data from the European Commission (EC). These data cover 70
transport fuel and heating oil prices and hint at a significant 100 50
price decline in April followed by a modest rebound in May. 30
Beyond this near-term tracking, Brent futures are downward 80 10
sloping, as are gas and electricity futures in the coming quar- 15 16 17 18 19 20 21 22 23
Source: Eurostat, EIA, J.P. Morgan
ters. We thus expect headline inflation to decline sharply go-
ing forward (Figure 1). In our view, energy price inflation will
turn negative in 2H23 and will bring headline inflation below We can model the oil-related component of the HICP energy
2%. basket with the price of Brent. To do so, we aggregate
transport fuel prices and heating oil in our analysis and re-
Figure 1: Euro area inflation forecast gress its %m/m changes on Brent prices (also %m/m, with
%oya %oya some lags). This model normally does a very good job of
10 50 explaining monthly price changes in oil-related HICP energy
8 40 components (Figure 3). But this relationship has been chal-
Headline
Energy 30 lenged in the last two years. At the time of the COVID out-
6
20 break the model suggested larger swings in consumer oil pric-
4 es than actually occurred because consumer prices include tax
10
2
0
and excise duties―a sticky component. In March this year,
0 -10
the model failed to capture the jump in heating oil prices
(concentrated in Germany).
-2 -20
15 16 17 18 19 20 21 22 23
Source: Eurostat, J.P. Morgan
12
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J.P. Morgan Securities plc Economic Research
Raphael Brun-Aguerre (44-20) 7134-8308 Global Data Watch
raphael.x.brun-aguerre@jpmorgan.com May 13, 2022
Figure 3: Euro area oil-related HICP energy Figure 4: Consumer prices: fuel for transport
%m/m (aggregate of fuel of transport and heating oil prices) %m/m
20 Actual 20 HICP
15 EC weekly prices
Model 15
10
10
5
5
0
0
-5
-10 -5
-15 -10
15 16 17 18 19 20 21 22 23 19 20 21 22
Source: Eurostat, J.P. Morgan Source: Eurostat, EC, J.P. Morgan
13
This document is being provided for the exclusive use of Kurt Zhang at Huatai Financial Holdings (Hong Kong) Limited.
J.P. Morgan Securities plc Economic Research
Raphael Brun-Aguerre (44-20) 7134-8308 Euro area: Tracking consumer oil
raphael.x.brun-aguerre@jpmorgan.com prices
May 13, 2022
80 Brent 210
60 140
40 70
20 0
2019 2020 2021 2022 2023
Source: Bloomberg Finance L.P., J.P. Morgan
100
140
Oil-related HICP
80
120
60
100
40
20 80
2019 2020 2021 2022 2023
Source: Eurostat, Bloomberg Finance L.P. J.P. Morgan
14
This document is being provided for the exclusive use of Kurt Zhang at Huatai Financial Holdings (Hong Kong) Limited.
J.P. Morgan Securities plc Economic Research
Marco Protopapa (44-20) 7742-7644 Global Data Watch
marco.protopapa@jpmorgan.com May 13, 2022
15
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J.P. Morgan Securities plc Economic Research
Marco Protopapa (44-20) 7742-7644 Spain: Consumption weakness
marco.protopapa@jpmorgan.com remains a key concern
May 13, 2022
by high oil and gas prices. While this shock affected all of the sessment: (i) a ramp up in policy measures since April (in-
Euro area, it likely had a more adverse effect on consumption cluding fuel subsidies), especially a planned cap that should
in Spain due to an earlier and larger inflation shock (Figure stabilize electricity prices at about 50%-60% of the recent
4), arguably amplified by a sluggish fiscal response, that came peaks (Figure 6; the electricity price shock has been mostly a
on top of an incomplete recovery in income. We estimate that Southern Europe peculiarity), (ii) the fact that inflation is ar-
higher inflation pushed real household disposable income guably near the peak and set to fall significantly as a result of
around 6%-pts lower in 1Q22 versus 4Q19. policy measures, and (iii) an expected strong recovery of tour-
ist flows in the forthcoming holiday season, which is likely to
Figure 4: Euro area HICP headline inflation rebuild confidence in an economy very dependent on seasonal
%oya nonresident spending.
Germany
10
9 France Figure 6: HICP electricity prices
8 Italy Italy
7 Jan 2021=100
6 Spain
200 Spain
5
4 180
France
3 160
2 Germany
1 140
0 120
-1
2018 2019 2020 2021 2022 2023 100
Source: Eurostat, J.P. Morgan 80
602019 2020 2021 2022 2023
More puzzling has been the breakdown of the usually tight
relationship between consumption and hours worked (Figure Source: Eurostat, J.P. Morgan
5). Until 1Q21, the decoupling between these series was un-
derstandable on account of excess savings, both forced (due to An alarm bell for the rest of the region?
COVID restrictions) and precautionary (due to uncertainty While the persistent weakness in Spanish household spending
about the speed of normalization of the economy). And it partly reflects idiosyncratic factors, the deep contraction in
seems quite likely that the diverging trend in 1Q22 (consump- 1Q22 consumption in Spain also sounds a warning signal for
tion contracting sharply in the face of a strong pickup in em- the rest of the region, given that the inflation shock material-
ployment) is a stark reminder of the intensity of the income ized slightly earlier in Spain. There is a risk that Euro area
shock due to energy inflation. However, the gap did not show consumption weakness may stretch well into the current quar-
any signs of closing during 2021, when the economy’s pro- ter. Plunging consumer confidence prints align with that, alt-
spects brightened and COVID restrictions eased. This inabil- hough the drop was much more pronounced in Spain than
ity of private spending to rise in line with labor market devel- elsewhere (Figure 7). The relaxation of COVID restrictions in
opments even in good times is a key risk to the outlook, espe- Germany, France, and Italy should provide an offset by sup-
cially as financing conditions are set to tighten in the next porting spending in high-contact services (possibly on the
quarters. back of accumulated excess savings). In this sense, it will be
important to see whether the PMI sustains the services lift
Figure 5: Consumption and hours worked seen in April through the rest of the quarter.
4Q19 = 100 Hours worked
100 Figure 7: Euro area consumer confidence
Balance, sa
95
0
90
GDP Germany
85 Household -10
consumption France
80
75 -20 Italy
2015 2016 2017 2018 2019 2020 2021 2022
Source: INE, Eurostat, J.P. Morgan
Spain
-30
2020 2021 2022 2023
Source: Eurostat, J.P. Morgan
At this stage, we remain confident that the trend will improve
from the spring onwards. Three main factors inform our as-
16
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JPMorgan Securities Japan Co., Ltd. Economic Research
Hiroshi Ugai (81-3) 6736-1173 Global Data Watch
hiroshi.ugai@jpmorgan.com May 13, 2022
Economic Research Note nese government is also discussing how to increase plants’
capacity utilization rates while ensuring that operations are
Japan: Restarting nuclear both safe and sustainable.
power could ease high energy Figure 1: Share of electric power generation
Japan imports most of its energy needs, and likely will Nuclear power New energy power etc.
2010 2021
incur high energy costs due to Russia’s invasion of
Ukraine
Japan has cut nuclear power generation significantly
since the Great Earthquake in 2011; restarting plants
could take considerable time
Restarting idle nuclear power plants more quickly could Source: Agency for Natural Resources and Energy
17
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JPMorgan Securities Japan Co., Ltd. Economic Research
Hiroshi Ugai (81-3) 6736-1173 Japan
hiroshi.ugai@jpmorgan.com May 13, 2022
0.3%-0.4% of nominal GDP (Table 1). However, since its impact on the macroeconomy would be
Table 1: Cost saving by restart of nuclear plants small, substituting nuclear energy for LNG imports would
increase the current account balance (as a % of GDP) from
2.1% in the baseline outlook in 2022 to 2.3% in Case 1 or
18
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JPMorgan Securities Japan Co., Ltd. Economic Research
Hiroshi Ugai (81-3) 6736-1173 Global Data Watch
hiroshi.ugai@jpmorgan.com May 13, 2022
1 Case 1 for
LNG imports
0
05 08 11 14 17 20
Note:Case 1 is utilizing plants stopped/permitted/under examination while Case 2 is utilizing
all plants, while . Source: MoF, Cabinet Office, J.P. Morgan estimates.
19
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JPMorgan Chase Bank, N.A., Singapore Branch Economic Research
Sin Beng Ong (65) 6882-1623 EM Asia: It's getting hot in here
sinbeng.ong@jpmorgan.com May 13, 2022
Nur Raisah Rasid (65) 6882 7375
raisah.rasid@jpmorgan.com
Economic Research Note covery this year. This non-goods recovery forms the basis for
the rise in core inflation that we think will have legs to run
EM Asia: It's getting hot in here beyond the inflection in headline inflation.
We expect EM Asia’s goods and non-goods sectors to Figure 1: EM Asia ex CN GDP
converge after period of COVID-related decoupling %2q/2q,saar
Goods
Global capex in focus for the goods sector, with slowing 30
Overall
expected as goods output returns to earth 20
Core inflation to follow non-goods recovery, interplay 10
between supply, demand, and diminishing slack is key
0
Central banks expected to focus on core CPI, which has
-10 Non-goods
upside risk, even as headline inflects around midyear
-20
10 13 16 19 22
In EM Asia, the 2022 expansion marks an unusual departure Source: National sources and J.P. Morgan forecasts in shaded area
from past recoveries, with anticipation of easing in goods out-
put and firming in the non-goods sector as the region moves
toward an endemic equilibrium. We expect that this growth Figure 2: Global capex nowcaster and EM Asia exports
convergence will create atypical conditions whereby slowing %6m/6m, saar %6m/6m, saar, US$ terms
external demand will be met with rising and broadening infla- 36 Global capex 45
tionary pressures. 21
nowcaster 30
15
Even though we have penciled in some easing in headline 6
0
inflation around the middle of the year as energy prices stabi- -9
lize, we expect that core inflation could continue to rise over -15
-24 y=2.61 + 1.59*x
much of this year. Specifically in focus is that the inflation R-sq=0.65,StdErr=9.25 EM Asia exports -30
process over the next two quarters represents the intersection -39 -45
of factors not seen since 2007/2008: the ongoing passthrough 06 08 10 12 14 16 18 20 22
from a broad-based rise in commodity prices, still-elevated Source: National sources and J.P. Morgan
20
This document is being provided for the exclusive use of Kurt Zhang at Huatai Financial Holdings (Hong Kong) Limited.
JPMorgan Chase Bank, N.A., Singapore Branch Economic Research
Sin Beng Ong (65) 6882-1623 Global Data Watch
sinbeng.ong@jpmorgan.com May 13, 2022
Nur Raisah Rasid (65) 6882 7375
raisah.rasid@jpmorgan.com
target ranges—India, Korea and the Philippines—while in into our thinking around central bank reaction functions and
Singapore, the MAS has surprised the markets hawkishly with core inflation elevated, we expect central banks to con-
(Figures 5 and 6). Taiwan’s CPI inflation has also surpassed tinue hiking even as headline CPI peaks (Figure 8).
the central bank’s medium-term comfort zone of 0-2% though
the recent rise in COVID-19 cases could temporarily slow the Figure 7: EM Asia headline and core CPI
move up in core prices. Standing out in the region, the Bank %oya, equal weighted
of Thailand has reiterated that it will look through the rise in 5
inflation. 4 Headline
3
Figure 4: EM Asia CPI and policy rate forecast revisions
Index, both scales 2
Core
102 96 1
CPI 0
100 Policy rate
95
-1
98 12 13 14 15 16 17 18 19 20 21 22
94 Source: National sources and J.P. Morgan forecasts in shaded area
96
93
94
Figure 8: EM Asia core CPI and policy rate
92 92 %oya and %p.a., eop, equal weighted
13 15 17 19 21 23
5 Policy rate
Source: National sources and J.P. Morgan
4
Figure 5: EM Asia CPI and policy rate forecast revisions 3
Change, year-to- May 5
2
5 Headline CPI Policy rate
4 1
Core CPI
3 0
12 13 14 15 16 17 18 19 20 21 22
2 Source: National sources and J.P. Morgan forecasts in shaded area
1
0 This is where the inflation readings over the next few months
-1 will be critical in calibrating the degree of policy tightening,
SG TH KR IN ID PH MY TW CN which we currently expect to progress in a relatively unhur-
Source: National sources and J.P. Morgan ried manner. And depending on the incoming core inflation
prints, the pace and extent of hikes could well be revised
Figure 6: EM Asia central bank inflation targets higher, as has recently occurred in India, Korea, and Malay-
%p.a., blue bars denote central bank inflation target range sia.
8
Latest A conjuncture of factors that could bias up
6 Dec 21 core inflation
4
Mechanistically, we think of core inflation as a two-stage pro-
cess, the first reflecting the trend in input prices, or upstream
2 prices, as captured in commodity prices. Upstream price pres-
sures then pass through into final prices via a markup, which
0 reflects, among other things, labor market slack and demand
IN PH KR TH ID CN conditions. In this context, the current set of conditions have
Source: National sources. KR and CN adopt medium-term average point targets
little precedent in the past decade.
Core in focus even as headline ebbs For a start, commodity price inflation is the broadest and
We expect headline CPI to inflect around midyear, but that highest in over a decade and is imparting a material lift to
core inflation readings through this year will remain sticky upstream producer prices, effectively reversing the period of
(Figure 7). This focus on core inflation has been a key input margin expansion that had run for a good part of the past dec-
21
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JPMorgan Chase Bank, N.A., Singapore Branch Economic Research
Sin Beng Ong (65) 6882-1623 EM Asia: It's getting hot in here
sinbeng.ong@jpmorgan.com May 13, 2022
Nur Raisah Rasid (65) 6882 7375
raisah.rasid@jpmorgan.com
ade (Figures 9 and 10). A simple margin proxy of the PPI-CPI Figure 12: EM Asia ex CN/IN PPI/CPI passthrough
passthrough suggests a degree margin compression and thus Coefficient of passthrough, PPI to CPI
ongoing buildup of latent price pressures that has not been 2.0
seen since 2010 (Figure 11). Dec. 2006-Jul. 2008
1.5 Dec 2009 - July 2012
Figure 9: Commodity price index and breadth
%oya % of index above 2-year moving average Dec. 2020 to Mar. 2022
1.0
50 Change 100%
Diffusion index
0.5
80%
25
60% 0.0
0 ID KR MY PH SG TH TW
40% Source: J.P. Morgan
-25
20%
Figure 13: EM Asia-51 employment income and core CPI
-50 0%
%oya, both scales, local currency terms, equal weighted
06 08 10 12 14 16 18 20 22
Source: Bloomberg Finance L.P. 12 Employment income, 4
advanecd 2-quarters
9 Core CPI 3
Figure 10: Commodity prices and EM Asia ex CN/IN PPI
6 2
%oya, both scales y=2.48 + 0.21*x
R-sq=0.59,StdErr=3.4 3 1
85 20
15 0 0
51 PPI
10
17 5 -3 -1
06 08 10 12 14 16 18 20 22
-17 0 Source: National sources; 1. HK, KR, SG, TH, TW
-5
-51
Commodity price index -10 These pricing developments are interacting with a broadening
-85 -15 cyclical recovery that is already evident in labor incomes and
06 08 10 12 14 16 18 20 22
Source: National sources core inflation (Figure 13). Notably, labor vacancy rates in
Korea and Singapore, where the economic structures are dis-
similar, are well above pre-COVID levels and speak to a
Figure 11: EM Asia ex CN/IN margin proxy growing tightness in labor markets in recent months (Figure
Ratio, CPI/PPI, 2010=1, sa 14).
1.20
Figure 14: Korea and Singapore labor vacancies
1.15
Ratio, vacancies/unemployed, sa, both scales
1.10
0.30 2.5
1.05
Korea
0.25
1.00 2.0
0.95 0.20
1.5
0.90 0.15
06 08 10 12 14 16 18 20 22
1.0
Source: National sources 0.10
Singapore
0.05 0.5
Upstream prices meet tightening labor 2018 2019 2020 2021 2022 2023
Source: National sources
markets and elevated savings rates
Moreover, the current coefficient of passthrough from PPI to While incomes should continue to rise in line with the recov-
CPI inflation remains below those of prior expansions in ery this could also interact with elevated household savings,
much of the region, except in Indonesia and the Philippines, which we proxy via household deposits, and remain above the
suggesting that there could be further passthrough from up- average of the pre-COVID decade (Figure 15). This rise in
stream to downstream prices (Figure 12). deposits is evident across countries, and generally higher in
22
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JPMorgan Chase Bank, N.A., Singapore Branch Economic Research
Sin Beng Ong (65) 6882-1623 Global Data Watch
sinbeng.ong@jpmorgan.com May 13, 2022
Nur Raisah Rasid (65) 6882 7375
raisah.rasid@jpmorgan.com
the more developed countries, and could reflect a combination sumer prices is more complete, which we expect to coincide
of precautionary savings and fiscal transfers (Figure 16). with some stabilization in labor market conditions.
Whether the expected winding down of accrued savings acts
on consumer prices via firming consumer demand or via Figure 17: EM Asia-41 food prices
higher labor reservation wages—with savings providing an %3m/3m, saar, equal weighted
intertemporal income buffer—remains to be seen. 15
Food services
Figure 15: EM Asia-41 household bank deposits 10
Food at home
2010=100, sa, avg., % of GDP Over year ago, %-pt.
130 15 5
2010-19 avg.
Index
Change
120 10 0
110 5
-5
100 0 06 08 10 12 14 16 18 20 22
Source: National sources; 1. KR, SG, TH, TW
90 -5
20
Figure 16: EM Asia-41 household bank deposits
% of GDP, 4Q21 less 2010-19 average 15
6
10
5
4
0
TH TW KR MY SG
2 Source: National sources; 1. KR, TW, TH: April, rest March
23
This document is being provided for the exclusive use of Kurt Zhang at Huatai Financial Holdings (Hong Kong) Limited.
JPMorgan Chase Bank, N.A., Singapore Branch Economic Research
Nur Raisah Rasid (65) 6882 7375 Malaysia:
raisah.rasid@jpmorgan.com May 13, 2022
Abbas Keshvani (65) 6801-3723
abbas.keshvani@jpmorgan.com
Economic Research Note goods in Malaysia, which arguably dulls the overall price sig-
nal. In that context, the NEER historically has exhibited broad
Malaysia: Monetary policy stability, barring periods of strong financial outflows as was
the case in 2015/16. Thus, despite the recent positive com-
management starts with growth modity tailwind, which in theory should raise the bias for the
Bank Negara’s mandate is to maintain monetary system tightening in monetary conditions, the NEER has remained
stability through the NEER and OPR broadly stable year-to-date, despite there being appreciation
pressures as evidenced by strong accumulation in gross FX
Monetary conditions have yet to tighten considerably as reserves (Figures 1 and 2).
its reaction function is guided by growth not inflation
Figure 1: Malaysia gross FX reserves and NEER
NEER could remain broadly stable in the coming US$ bn Index, 2012=100
months despite further monetary policy tightening amid
150 Gross FX reserves 105
a cloudy external demand outlook
100
The risk is that FX policy liberalization and CNY effect
130
could hinder appreciation in the NEER NEER 95
90
110
Bank Negara’s primary mandate is to maintain monetary sys-
85
tem stability through the nominal effective exchange rate
(NEER) and the overnight policy rate (OPR). We have noted 90 80
that this process is guided by growth rather than inflation, due 12 14 16 18 20 22
Source: BNM, J.P. Morgan
in part to the raft of price controls for basic consumer goods
that dulls the price signal. Despite recent external develop-
ments, which arguably will deliver positive spillovers onto the Figure 2: Malaysia trade balance
economy, this has yet to materialize in the tightening of mon- US$bn, nsa
etary conditions as the growth recovery remains incomplete 5 Commodity1
with the firming in goods activity amid the cloudy external 4 trade balance
demand outlook. In our view, achieving a firm footing for 3
2
domestic growth will be key to guiding the OPR path while 1
the bias around NEER levels hinges on the external demand 0
outlook. Thus, while Bank Negara continues on its path to- -1
-2 Others
ward more OPR hikes in 2H22, the NEER could remain -3
broadly stable in the coming months reflecting the downside -4
risk around the goods sector. 12 14 16 18 20 22
Source: DOS, J.P. Morgan. 1. Sum of net rubber, LNG, CPO and oil (crude & processed)
24
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JPMorgan Chase Bank, N.A., Singapore Branch Economic Research
Nur Raisah Rasid (65) 6882 7375 Global Data Watch
raisah.rasid@jpmorgan.com May 13, 2022
Abbas Keshvani (65) 6801-3723
abbas.keshvani@jpmorgan.com
Figure 3: Malaysia GDP by sector Under the new rules, exporters have been converting less of
Index, sa, 4Q19=100 their export proceeds, but importers continue to demand dol-
115 Manufacturing lars. Unless BNM starts requiring greater conversion or an
exogenous factor spurs exporters to voluntarily convert more
110
of their proceeds, the MYR is unlikely to enjoy much support
105 from Malaysia’s robust export growth. A change in the export
100 conversion rules, tantamount to capital controls, would be
95 unlikely unless there is an emergency. But voluntary conver-
sion may come along next month, when we note a seasonal
90 Services Overall
drawdown in corporate FX deposits (Figure 6). Over a longer-
85
term horizon, continued NEER appreciation will require pro-
2019 2020 2021 2022
Source: DOS, J.P. Morgan forecasts in shaded region tracted voluntary conversion by corporates, for which there is
no clear driver at this stage.
Figure 4: Malaysia NEER and OPR Figure 6: Average monthly change in companies' FX deposits
Index, 2012=100 %p.a. USD bn
105 3.25 0.6
Dollarization is a drag on the MYR Aside from exporters hesitating on converting their proceeds,
dollarization could also play out in capital markets. In the past
The MYR has failed to benefit from the commodity rally due
we have observed a strengthening dollar has resulted in de-
to BNM management of the currency, corporates holding onto
positors in Malaysia rotating from local to foreign currency.
dollars, and the CNY effect. Although the central bank may
Indeed, the last Fed hiking cycle saw such a rotation play out
turn more tolerant of appreciation (in the NEER), the other
(Figure 7).
two factors remain a drag on the currency. In April last year,
Bank Negara liberalized its foreign exchange policy, relaxing
Figure 7: Malaysia deposits of business enterprises
the export conversion rule for resident exporters and permit-
MYR bn, change from year ago
ting domestic trade settlement in foreign currency with other
residents in the global supply chain. Since the change in the 70
60 LC deposits
rules, Malaysian companies’ FX deposits have increased sig- 50
nificantly, outpacing most of their peers in the region (Figure 40
30
5). 20
10
Figure 5: FX deposits in banking system 0
-10 FX deposits
Indexed to Jan 2019 level
-20
1.5 -30
1.4 2012 2014 2016 2018 2020 2022
1.3 Source: BNM, J.P. Morgan
1.2
1.1
1.0 Foreigner investors, faced with the double whammy of cur-
0.9 rency losses and higher yields, could react by reducing their
0.8
holdings of MYR debt. Again, we saw this happen during the
2019 2020 2021 2022
MYR THB PHP last Fed hiking cycle: foreign holdings of MYR debt reached
IDR KRW TWD a low of US$40.3bn in March 2017 (the low point of hold-
Source: Haver, J.P. Morgan ings) from US$501.bn in December 2015 (the first hike). For-
25
This document is being provided for the exclusive use of Kurt Zhang at Huatai Financial Holdings (Hong Kong) Limited.
JPMorgan Chase Bank, N.A., Singapore Branch Economic Research
Nur Raisah Rasid (65) 6882 7375 Malaysia:
raisah.rasid@jpmorgan.com May 13, 2022
Abbas Keshvani (65) 6801-3723
abbas.keshvani@jpmorgan.com
0.8
0.6
0.4
0.2
0.0
TWD MYR SGD KRW THB PHP INR IDR
Source: Bloomberg Finance L.P., J.P. Morgan; Note: X-variables expressed as Z-scores
26
This document is being provided for the exclusive use of Kurt Zhang at Huatai Financial Holdings (Hong Kong) Limited.
JPMorgan Chase Bank NA Economic Research
Daniel Silver (1-212) 622-6039 Global Data Watch
daniel.a.silver@jpmorgan.com May 13, 2022
Michael Feroli (1-212) 834-5523
michael.e.feroli@jpmorgan.com
point over the next few years (Figure 1). However the eco-
United States nomic data still suggest that a recession over the next year is
Core CPI surprised to the upside, with strong 0.6% unlikely.
April gain
Figure 1: Estimated probabilities of recession
Jobless claims and SLOOS point to momentum loss Odds of recession starting over specified horizon
But we think April retail sales report will be strong, 60% 3 years
including 1.5% headline gain
40% 2 years
Data reports this week mainly focused on inflation. Most im- 20%
1 year
portantly, the April consumer price index (CPI) showed a 0%
stronger-than-expected 0.6% increase in core inflation during Jan 21 Apr 21 Jul 21 Oct 21 Jan 22 Apr 22
Source: Various sources, J.P. Morgan
the month. Not only was the core reading above expectations,
the core inflation firmness has shifted recently from goods to
services, with the services strength more likely to be persis- CPI strength now in core services
tent given the tightness in the labor market. The CPI increased 0.3% in April, a tick above the consensus
forecast and a tick below our own estimate. Away from the
Strong inflation has been a key factor pushing the FOMC to changes in food (0.9%) and energy (-2.7%), the core CPI in-
tighten policy and we think that strength in the April CPI creased 0.6% in April (0.569% to three decimals), beating
keeps pressure on the Committee to raise rates by 50bp at the expectations by two-tenths. While year-ago inflation rates
next two meetings. Comments from Powell on Thursday sig- moderated for both the headline and the core measures be-
naled his continued support for 50bp hikes at the next two tween March and April, they remained firm in the latest
meetings, consistent with his messaging from the May FOMC prints, with the headline at 8.3%oya and the core at 6.2%oya
press conference. (Figure 2).
Fed hikes are designed to tighten financial conditions and Figure 2: Broad CPI aggregates
financial conditions have responded accordingly. While the % change over 12 months
latest daily changes have varied, interest rates are noticeably 10 Headline Core
higher since the start of the year while the dollar has appreci- Trimmed mean Median
8
ated significantly and equity markets have dropped. Not as
clear is whether the tightening in conditions to date is more or 6
less than the FOMC desires and how the economy will re- 4
spond over time. For now, we see some downside risk to our 2
growth outlook based on the tightening in financial conditions
0
to date. There are already some signs that the economy has
-2
lost momentum, including news this week on jobless claims
15 16 17 18 19 20 21 22 23
filings and the Senior Loan Officer Opinion Survey. It hasn’t Source: BLS, Cleveland Fed, J.P. Morgan
been all bad news, however, and our Chase consumer card
data signal that consumer spending had a strong start to the But the trimmed mean and median alternative measures of
second quarter in April. We expect total retail sales to be up trend CPI inflation kept climbing into April (Figure 2) and
1.5% in next week’s April report, with control sales rising core services prices looked particularly firm within the April
1.4%. CPI, rising 0.7%. Core goods prices were much softer on net
in April, rising 0.2% during the month, and we are seeing
While the Fed is trying to slow the economy in an effort to signs that some of the factors that had pushed core goods
lower inflation, it remains to be seen whether it can achieve a prices up significantly earlier in the pandemic are starting to
“soft landing.” Powell has noted that a move down in job va- moderate (or reverse). If supply chain issues keep easing and
cancies would be desirable, but past meaningful declines in demand shifts back from goods to services, core goods prices
job openings historically have been associated with reces- likely will move down closer to the pre-pandemic trend (Fig-
sions. With the tight labor market, our recession risk models ure 3). But the firmness in core services prices could be sus-
show fairly high probabilities that a recession starts at some tained, particularly if the labor market remains tight and wag-
27
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JPMorgan Chase Bank NA Economic Research
Daniel Silver (1-212) 622-6039 United States
daniel.a.silver@jpmorgan.com May 13, 2022
Michael Feroli (1-212) 834-5523
michael.e.feroli@jpmorgan.com
es keep rising. Inflation expectations also could be important Figure 4: SLOOS responses on residential mortgages
in determining the path for wages and consumer prices going Net % of responses Reporting tightening
forward. The University of Michigan’s main inflation expec- standards
80
tation measures have moved up noticeably since the start of
60 Reporting more
the pandemic, but they have not changed much in recent demand
months and remain below many of the readings from the 40
1970s and 1980s. 20
28
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JPMorgan Chase Bank NA Economic Research
Michael Feroli (1-212) 834-5523 Peter B McCrory (1-212) 622-5252 Global Data Watch
michael.e.feroli@jpmorgan.com peter.mccrory@jpmchase.com May 13, 2022
Daniel Silver (1-212) 622-6039
daniel.a.silver@jpmorgan.com
Data releases and forecasts hough auto industry production schedules signal little
change in related output in April following the surge re-
Mon Empire State survey ported for March. Overall, we look for a 0.4% increase
May 16 Diffusion indices, sa in manufacturing output in April, with a similar 0.4%
8:30am Feb Mar Apr May gain for the total excluding motor vehicles and parts.
General bus. conditions 3.1 -11.8 24.6 12.0 Away from manufacturing data, we believe utilities out-
New orders 1.4 -11.2 25.1 put increased 2.3% in April with changes in weather
Shipments 2.9 -7.4 34.5 likely generating increased demand for utilities relative
Unfilled orders 14.4 13.1 17.3 to seasonal norms. We also expect some moderation in
Prices paid 76.6 73.8 86.4 the mining output data (-0.5%) in April following a solid
Prices received 54.1 56.1 49.1 run over the prior few months.
Composite 56.1 55.0 60.2
We believe the Empire State manufacturing survey’s Tue Business inventories
headline composite fell from 24.6 in April to 12.0 in May 17 %m/m, sa, unless noted
May. The survey surprisingly improved significantly be- 10:00am Dec Jan Feb Mar
tween a downbeat March report and an upbeat April re- Inventories 2.4 1.3 1.5 1.9
port, but we think that activity in the manufacturing sec- Manufacturing 0.4 0.8 0.7 1.3
tor could be cooling, particularly given the recent dollar Wholesale 2.5 1.2 2.8 2.3
appreciation. We therefore expect moderation in the Em- Retail inventories 4.3 1.8 1.5 2.0
pire State survey to be reported for May. Ex autos 3.6 1.6 1.5
Autos 6.5 2.3 1.4
Inventory/sales ratio 1.29 1.27 1.27 1.30
Tue Retail sales We believe nominal business inventories increased 1.9%
May 17 %m/m, sa in March, with reported data on the underlying compo-
8:30am Jan Feb Mar Apr nents already pointing to strong growth that month.
Total 2.7 1.7 0.7 1.5 There have been strong gains for inventories lately (in
Ex autos 1.6 1.8 1.4 0.8 both real and nominal terms).
Ex autos and gas 2.0 1.3 0.7 1.5
Building materials 2.3 0.4 0.2 -1.4
Control group¹ 3.0 0.3 0.7 1.4 Tue Homebuilders survey
Ex. autos and building mat. 1.5 1.9 1.5 1.0 May 17 Sa
1. Total ex. gasoline, automotive dealers, building materials, and food serv. 10:00am Feb Mar Apr May
We forecast that retail sales increased 1.5% in April. Our Housing market 81 79 77 76
Chase consumer card data point to strong growth in sales Present sales 89 87 85
of food services (forecast: 3.4%) and sales of the im- Prospective buyer traffic 65 66 60
portant control group (forecast: 1.4%) in April. And an
We look for the NAHB survey’s headline to move down
increase in unit auto sales already reported for the month
1pt to 76 in March. We believe that the recent move up
bodes well for sales at motor vehicle and parts dealers,
in mortgage rates has weighed on homebuilder sentiment
for which we forecast a 4.6% increase in the relevant re-
and we think that this continued to play out over the past
tail sales series. We think there could be some weakness
few weeks.
in certain other major components, as price declines
weigh on the related nominal figures; with gas prices
down, we expect a 4.3% drop in gasoline station sales in
April and with lumber prices falling, we look for a 1.4%
decline in building material sales.
29
This document is being provided for the exclusive use of Kurt Zhang at Huatai Financial Holdings (Hong Kong) Limited.
JPMorgan Chase Bank NA Economic Research
Michael Feroli (1-212) 834-5523 Peter B McCrory (1-212) 622-5252 United States
michael.e.feroli@jpmorgan.com peter.mccrory@jpmchase.com May 13, 2022
Daniel Silver (1-212) 622-6039
daniel.a.silver@jpmorgan.com
30
This document is being provided for the exclusive use of Kurt Zhang at Huatai Financial Holdings (Hong Kong) Limited.
JPMorgan Chase Bank NA Economic Research
Michael Feroli (1-212) 834-5523 Peter B McCrory (1-212) 622-5252 Global Data Watch
michael.e.feroli@jpmorgan.com peter.mccrory@jpmchase.com May 13, 2022
Daniel Silver (1-212) 622-6039
daniel.a.silver@jpmorgan.com
tions by two-tenths. While year-ago inflation rates moderated Feb Mar Apr
for both the headline and the core measures between March Import prices 1.6 1.8 2.6 2.9 0.5 0.0
%oya 11.3 11.4 12.5 13.0 12.0 12.0
and April, they remained firm in the latest prints (headline at Ex-fuel import 0.7 0.9 1.2 0.4 0.4
8.3% oya, core at 6.2% oya). And the persistent strength in %oya 7.3 7.4 7.5 7.7 7.1 7.2
core inflation is probably keeping pressure on the FOMC to The import price index was softer than expectations in April,
raise rates by 50bp at upcoming meetings. with the headline figure unchanged relative to March. Fuel
In some of the broad details of the report, energy prices did prices declined 2.4% in April (offsetting a small part of their
come off somewhat in April (-2.7%) following their March March surge), weighing on the headline figure. And away
surge (11.0%), and food prices continued to rise at a rapid from fuels, prices were up 0.4% in April, a figure in line with
rate, up another 0.9% in April. There were mixed changes our forecast. While the underlying trend in nonfuel import
across core CPI categories, but firmness overall. Core services price inflation remained solid, there are some signs that we
prices looked particularly strong, up 0.7% in April, marking may have moved past peak inflation rates (though keeping in
the largest monthly gain since 1990. And while an 18.6% mind that one month doesn’t make a trend). The April month-
surge in airfares helped push up core services prices, the data ly change in the nonfuel index was the softest reported since
looked firm even away from this specific category. Core last September, and the year-ago inflation rate for the nonfuel
goods prices were much softer on net in April, rising 0.2% price index moved down from 7.7% in March to 7.2% in
during the month, and we are seeing signs that some of the April.
factors that had pushed core goods prices up significantly ear-
lier in the pandemic are starting to moderate (or reverse); per- Consumer sentiment (May 13)
haps most notably, used vehicle prices declined 0.4% in April, Michigan preliminary
the third straight monthly decline for this series. Mar Apr May
As mentioned above, airfares surged 18.6% in April, and with Univ. of Mich. Index 59.4 65.2 66.0 59.1
Current conditions 67.2 69.4 63.6
big increases in recent months, are now noticeably above the Expectations 54.3 62.5 56.3
pre-pandemic trend. We think that this surge in airfares added Inflation expectations
about 0.2%-pt to the April change in core services prices and Short term 5.4 5.4 5.4
about 0.1%-pt to the April change in the broader core CPI. Long term 3.0 3.0 3.0
The CPI’s rent measures continued to look firm, with tenants’ The preliminary May print for the University of Michigan
rent up 0.56% in April and owners’ equivalent rent rising consumer sentiment index was downbeat and below expecta-
0.45%. And the lodging away from home index kept rising at tions. The headline declined from 65.2 in April to 59.1, with
a solid clip, with prices up 1.7% in April. Used vehicle prices this latest figure marking a new low since the start of the pan-
did decline 0.4% in April, although inflation for new vehicles demic and showing a very low level of sentiment by broader
was firm again in April (1.1%) following a few softer months. historical standards. A range of factors can influence consum-
Apparel prices also cooled somewhat in April (-0.8%) undo- er attitudes, but we think that the recent strength in inflation
ing a small portion of earlier gains. and weakness in equity markets probably have weighed on
sentiment.
Producer price index (May 12) Elsewhere in the survey, the main inflation expectations were
%m/m, sa, unless noted unchanged between April and May, with the median one-
Feb Mar Apr year-ahead measure holding at 5.4% and the median five-
Final demand 0.9 1.1 1.4 1.6 0.8 0.5 year-ahead expectation holding at 3.0%. These gauges of in-
%oya (nsa) 10.3 10.4 11.2 11.5 11.3 11.0
Core 0.4 0.5 1.0 1.2 0.8 0.4 flation expectations have increased noticeably relative to
%oya (nsa) 8.7 8.8 9.2 9.6 9.3 8.8 where they were before the pandemic began but there has not
Energy 7.5 7.2 5.7 6.4 1.3 1.7 been much change in the data in recent months.
Core goods 0.8 1.1 0.8 1.0
Services 0.3 0.5 0.9 1.2 0.7 0.0
Construction 0.5 0.6 2.0 4.0
Intermed. processed gds 1.5 2.1 2.2 2.2
Core intermed. processed 0.3 0.8 0.7 1.4
The producer price index (PPI) increased 0.5% in April, a
gain in line with the consensus forecast. The main underlying
details showed strong increases for both food prices (1.5%)
and energy prices (1.7%) and another solid increase in the
core measure that excludes food and energy (0.4%). While the
April change in the core index was easily above the pre-
pandemic trend, it did come out below expectations and rep-
resented one of the softer monthly readings we have seen in
over a year. Year-ago rates for both the headline and core PPI
measures moderated between March and April, so while infla-
Sources: ADP/Moody’s Analytics, BEA, BLS, Census Bureau, Conference Board, Department of
tion is still looking strong, there are some signs that we may Labor, Federal Reserve Board, ISM, J.P. Morgan forecasts, NAHB, NAR, NFIB, NY Fed, Markit,
have moved past peak rates. The details of the PPI that factor Philadelphia Fed, Standard & Poor’s, University of Michigan, US Treasury
into our core PCE tracking looked soft on net.
Import prices (May 13)
%m/m, nsa, unless noted
31
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JPMorgan Chase Bank NA Economic Research
Michael Feroli (1-212) 834-5523 Focus: The Dudley rule applies
michael.e.feroli@jpmorgan.com to vacancies, too
May 13, 2022
Last week Fed chair Powell laid out a path to a soft landing: job One issue with assessing the feasibility of Powell’s argument
vacancies could come down without unemployment going up. is that the vacancy data he’s referring to—from the Job Open-
What’s nice about this idea is that it seems to get around the ings and Labor Turnover Survey, or JOLTS—are only availa-
challenges posed by the Dudley rule: the regularity that when- ble since late 2000. To address this limitation, Fed researcher
ever the smoothed (3-month moving average) unemployment Regis Barnichon has created a longer series, using help want-
rate moves up 0.3%-pt or more, over any time period, it’s a sign ed data from newspapers and online sources.1 That series is
the economy is in recession or about to enter one (Figure 1). In presented in Figure 3.
other words, it’s hard to push up the unemployment rate just a
little bit without tipping the economy into recession. Figure 3: Job vacancy rate
Vacancies as % of employment
Figure 1: The Dudley rule 7
Unemployment rate, 12-mo change in 3mma
6
4
5
2 4
0.3pp 3
0
2
-2 1
51 56 61 66 71 76 81 86 91 96 01 06 11 16 21
Source: BLS, Barnichon
-4
48 53 58 63 68 73 78 83 88 93 98 03 08 13 18 As is apparent, the recent vacancy rates are well above previous
Source: BLS, J.P. Morgan
historical highs. Perhaps somewhat less obvious, the vacancy rate
Against this dispiriting observation, Chair Powell happily displays some of the same asymmetries and nonlinearities of the
offered: “There’s a path by which we would be able to have unemployment rate. And, mirroring the unemployment rate,
demand moderate in the labor market, and…have vacancies whenever the vacancy rate goes down a little it goes down a lot,
come down without unemployment going up, because vacan- and the economy lands in recession. More specifically, when the
cies are at such an extraordinarily high level. They’re 1.9 va- 3-month average vacancy rate goes down 0.5%-pt or more the
cancies for every unemployed person, eleven and a half mil- economy is in recession (Figure 4). The late 1960s slowdown is
lion vacancies, six million unemployed people.” The ratio the closest the economy has come to a vacancy soft landing.
Powell mentioned is in Figure 2.
Figure 4: The Dudley rule, vacancy corollary
Figure 2: Vacancies per unemployed worker Vacancy rate, 12-mo change in 3mma
Ratio 3
2.0 2
1.5 1
0
1.0 -1 -0.5pp
0.5 -2
-3
0.0 51 56 61 66 71 76 81 86 91 96 01 06 11 16 21
00 05 10 15 20 Source: BLS, Barnichon, J.P. Morgan
Source: BLS, J.P. Morgan
Relabeling the Fed’s task ahead as lowering the vacancy rate
Powell went on to say: “So in principle, it seems as though by rather than increasing the unemployment rate may be good
moderating demand, we could see vacancies come down. And branding, but it doesn’t change the difficulty of completing
as a result, and they could come down fairly significantly. that task without slipping into recession.
And I think put supply and demand at least closer together
than they are. And that would give us a chance to…get wages 1
“Building a composite Help-Wanted Index,” Economics Letters,
down, and get inflation down without having to slow the Dec 2010.
32
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J.P. Morgan Securities plc Economic Research
Marco Protopapa (44-20) 7742-7644 Greg Fuzesi (44-20) 7134-8310 Global Data Watch
marco.protopapa@jpmorgan.com greg.x.fuzesi@jpmorgan.com May 13, 2022
Raphael Brun-Aguerre (44-20) 7134-8308
raphael.x.brun-aguerre@jpmorgan.com
This week, the data flow was quite limited. The key release
The country details for March show an uneven picture. Ger-
was March IP, with a large drop providing the first indication
man IP ex. construction fell 5.0%m/m while the decline was
of the impact of the Russia-Ukraine war on Euro area produc-
tion. At the same time, the composite PMI suggests that activ- overall much more modest in the rest of the region (Figure 2):
ity remained resilient through April, even though sentiment, France was down 0.5%, Italy was flat, and Spain was down
and especially consumer confidence remained depressed. 1.8%. Germany also continues to underperform sharply in
Looking into the current quarter, we think that the relaxation comparison to the pre-pandemic norm. At the sector level,
of COVID restrictions (including to cross-border travel) will production in the transport sector (auto and trailers) dropped
boost spending in high-contact services (possibly on the back 7.2%m/m. Significant declines also took place in chemical
of accumulated excess savings) and more than offset the and pharma (-5.2%), rubber and plastics (-2.9%), basic metal
weakness related to the income shock from high inflation. In (-1.7%), and machinery and equipment (-2.6%).
this sense, it will be important to see whether the PMI sustains
the services lift seen in April through the rest of the quarter. Figure 2: Euro area IP ex. construction
Jan20=100 Germany
France
IP fell sharply in March
100
Euro area IP ex. construction contracted 1.8%m/m in March.
Despite this large drop, IP is still showing a 3.7% ar sequen-
tial gain in 1Q22, due to the strong momentum seen late last 90
year. Manufacturing output also fell 1.6%m/m, for a 5.0% ar Italy
gain in 1Q22. The flash 0.8% ar GDP print for 1Q22 was al- Spain
ready released at the end of April and we do not think that this 80
week’s IP data will warrant any significant revision. 2019 2020 2021 2022 2023
Source: Eurostat, Destatis, INSEE, Istat, INE, J.P. Morgan
33
This document is being provided for the exclusive use of Kurt Zhang at Huatai Financial Holdings (Hong Kong) Limited.
J.P. Morgan Securities plc Economic Research
Marco Protopapa (44-20) 7742-7644 Greg Fuzesi (44-20) 7134-8310 Euro area
marco.protopapa@jpmorgan.com greg.x.fuzesi@jpmorgan.com May 13, 2022
Raphael Brun-Aguerre (44-20) 7134-8308
raphael.x.brun-aguerre@jpmorgan.com
Figure 3: Euro area PMI - Output Looking forward, futures prices hint at lower prices ahead
DI, sa (Figure 4). Our forecast assumes that the price of Brent will
65 Manufacturing average close to US$104 in 2H22, in line with market prices.
We then expect it to slip to US$97.5 next year (vs. US$93.2
60 according to market participants). We expect gas prices to
55 move down from €110/Mwh for the rest of this year to
€90/Mwh next year. We assume that electricity prices will
50
average €210/Mwh for the rest of the year and will come
45 Services down to €170/Mwh. Market prices are lower than we assume
for gas, but higher than we assume for electricity.
40
2016 2017 2018 2019 2020 2021 2022 2023
Source: Markit and J.P. Morgan Figure 4: Commodity prices
$/barrel Gas €/Mwh
Energy represents only 11% of the Euro area inflation basket, 80 Brent 210
but due to large swings in energy prices, this component is a
60 140
very important driver of headline inflation. Since the start of
2021, energy prices have been responsible for most of the rise 40 70
in headline inflation. Within energy prices, oil prices have
20 0
played a significant role. Historically, there has been a tight 2019 2020 2021 2022 2023
relationship between the prices of Brent and HICP fuel prices Source: Bloomberg Finance L.P., J.P. Morgan
(for transport and heating), but in the last two years this rela-
tionship has been challenged: the model suggested larger Overall, we expect the price pressure coming from energy
swings in consumer fuel prices than actually occurred after commodities to fade sharply in the coming quarters. As a re-
the start of the COVID-19 pandemic and then failed to cap- sult, we expect HICP energy price inflation to decline sharply,
ture the strong increase seen in March this year. from 39%oya in 2Q22 to close to 0% in 2Q23. In 2H23, we
expect HICP energy price inflation to average -6.5%oya,
We also think that our models won’t be able to pick up con- which will be a significant drag on headline inflation. In our
sumer price changes linked to government measures. Gov- view, headline inflation will gradually decline to a level be-
ernments are offsetting the rise in the price of Brent by reduc- low 2% in 2H23 (Figure 5).
ing taxes and excise duties on fuel for transport prices. In
Germany, the impact of the measures is a 25-cent decline in Figure 5: Euro area inflation forecast
fuel prices for transports between June and September. The %oya, shaded area shows forecast %oya
decline represents 30 cents between April and June in Italy 10 50
and 20 cents over the same period in Spain. In France, the 8 40
Headline
government provided a rebate worth 15 cents to consumers in Energy 30
6
April but that rebate did not impact consumer prices directly. 20
4
10
An alternative is to use weekly data for fuel for transport and 2
0
heating oil prices published by the European Commission. 0 -10
These prices include tax and excise duties decided at the gov-
-2 -20
ernment level and correlate nearly one-to-one with monthly 15 16 17 18 19 20 21 22 23
consumer prices. For April, these data suggest that HICP fuel Source: Eurostat, J.P. Morgan
for transport and heating oil prices are set to decline signifi-
cantly (by 5.0% and 9.5%, respectively). The official April
HICP details will be available next week for comparison. Da-
ta are also already available for the first two weeks of May.
So far, these data hint at modest rebounds in May (1.2% and
2.8%, respectively).
34
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J.P. Morgan Securities plc Economic Research
Marco Protopapa (44-20) 7742-7644 Greg Fuzesi (44-20) 7134-8310 Global Data Watch
marco.protopapa@jpmorgan.com greg.x.fuzesi@jpmorgan.com May 13, 2022
Raphael Brun-Aguerre (44-20) 7134-8308
raphael.x.brun-aguerre@jpmorgan.com
Unemployment
2Q21 3Q21 4Q21 1Q22 Source: European Commission, Eurostat, ECB, FSO, Bundesbank, IFO, INSEE, ISAE, Istat, INE,
Tue France CBS, BNB, Markit, and J.P. Morgan forecasts
May 17 %, sa
7:30am ILO unemployment rate 8.0 8.0 7.4
ILO mainland unemp. rate 7.8 7.8 7.2
35
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J.P. Morgan Securities plc Economic Research
Marco Protopapa (44-20) 7742-7644 Greg Fuzesi (44-20) 7134-8310 Euro area
marco.protopapa@jpmorgan.com greg.x.fuzesi@jpmorgan.com May 13, 2022
Raphael Brun-Aguerre (44-20) 7134-8308
raphael.x.brun-aguerre@jpmorgan.com
Inflation
Consumer prices
Feb Mar Apr
Germany (final)
%m/m, nsa 0.9 2.5 0.8
%oya, nsa 5.1 7.3 7.4
HICP (%oya) 5.5 7.6 7.4 7.8
Source: European Commission, Eurostat, ECB, FSO, Bundesbank, IFO, INSEE, ISAE, Istat, INE,
CBS, BNB, Markit, and J.P. Morgan forecasts
36
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JPMorgan Securities Japan Co., Ltd. Economic Research
Ayako Fujita (81-3) 6736-1172 Hiroshi Ugai (81-3) 6736-1173 Global Data Watch
ayako.fujita@jpmorgan.com hiroshi.ugai@jpmorgan.com May 13, 2022
Yuka Mera (81-3) 6736-1167
yuka.mera@jpmorgan.com
time since December 2021 (Figure 1). The April rise was
Japan modestly short of our and market expectations for a 3.2pt rise
The economy continues to move toward an endemic to 51.0, yet indicated a solid recovery continuing after the
equilibrium, with a plan to further ease restrictions initial bounce in business sentiment in March. Among sub-
components, the employment index rose the most, with a
Private consumption picked up in March, with services 3.1pt rise to 62.6, the highest level since January 2014 (Figure
consumption rising firmly 2). Firms indicated strong hiring demand among services as
Small firms’ sentiment improved in April, but supply business resumes post the Omicron wave. Business resump-
bottlenecks continued to weigh on the recovery tion also pushed up the household-related DI, with a firm
2.8pt rise to 49.6. However, some retailers, such as auto deal-
The BoJ’s mini-minutes of the April meeting revealed ers and home appliance stores, noted persistent sales drags
its strong commitment to the current policy stance from supply-chain disruptions, noting that some consumers
stopped shopping due to a lack of desired products. The sup-
The normalization of economic activity in the run-up to the ply bottlenecks appear still to weigh on production, and the
endemic equilibrium has continued since the March lifting of recovery in the business-related DI continues to lag behind
the quasi-emergency measures. And this week’s economic those of others, remaining at 47.4 even after a 1.9pt rise in
indicators confirmed an ongoing economic recovery, with a April. The outlook DI indicated a further recovery for house-
further improvement in small firms’ business sentiment in holds and businesses, but a softening in employment, com-
April, following a solid rise in real consumption in March. pared to the current DIs. This indicates that firms expect the
Restrictions on the number of people at events and dining out economic recovery to continue, but that the current improve-
and on travel between prefectures had already been substan- ment in employment conditions will be short-lived, viewing it
tially reduced, and public transportation use during the Gold- as reflecting a temporary surge in demand after the Omicron
en Week Holidays through last week rose significantly com- wave.
pared to the same periods in 2020 and 2021, although remains
below the pre-pandemic level. The government plans to fur- Figure 1: Economy Watchers' current conditions and outlook DIs
DI, sa
ther ease COVID-19 restrictions starting from June, close to
levels comparable to those of global peers, including receiv- 60 Outlook
ing foreign tourists and easing the requirement to wear masks. 55
50
We expect this to further push up business and consumer sen-
45
timent, supporting the expected strong economic bounce in
40
coming quarters. 35
30 Current conditions
Ahead of the next week’s release of the first estimate of 1Q22 25
GDP, this week, we revised up our 1Q GDP growth estimates 20
from a 1.5%q/q, saar decline to a 0.3% rise. Against our orig- 2015 2016 2017 2018 2019 2020 2021 2022
Source: CAO, J.P. Morgan
inal expectation of a 3.0% contraction, this week’s consump-
tion data indicated a modest 0.2% rise in private consumption,
with a strong bounce in March. As business activity continues Figure 2: Economy Watchers' assessment of current conditions
to normalize after the March lifting of the quasi-emergency DI, sa
measures, we expect consumption to become the main growth 70
Employment
driver ahead and look for a 7.0% jump in 2Q. This likely will Corporate
be fueled by the upcoming easing of the COVID-19 border 60
controls starting from June. We expect this to be confirmed 50
by the May Reuters’ Tankan survey due next week, where we Household
look for the second consecutive monthly rise in the nonmanu- 40
facturing index from 8 in April to 10. April trade statistics 30
will also be released next week.
20
2015 2016 2017 2018 2019 2020 2021 2022
Small firms’ sentiment continued to recover Source: CAO, J.P.Morgan
37
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JPMorgan Securities Japan Co., Ltd. Economic Research
Ayako Fujita (81-3) 6736-1172 Hiroshi Ugai (81-3) 6736-1173 Japan
ayako.fujita@jpmorgan.com hiroshi.ugai@jpmorgan.com May 13, 2022
Yuka Mera (81-3) 6736-1167
yuka.mera@jpmorgan.com
Consumption picked up in March tic inflation largely attributable to recent elevated import costs,
real wages turned negative for the first time in three months,
The BoJ’s Consumption Activity Index (CAI, travel balance
declining 0.2%oya in March. We continue to expect nominal
adjusted) rose 1.9%m/m, sa in March, leaving the 1Q22 aver-
wage growth to recover firmly from the modest gain in 2021,
age 12.8%q/q, saar below 4Q21. With the gradual lifting of
especially supported by the increase in overtime and special
quasi-emergency measures, consumption regained momentum
payments, reflecting the economic reopening and the past
in March after declining for two consecutive months in Janu-
growth in corporate earnings. However, in response to ex-
ary and February. Services consumption rose 2.9% in March,
pected higher inflation, real wages should decline slightly this
reflecting a rise in mobility in response to the lifting of
year. That said, we also expect that the negative impact of a
COVID-19 behavioral restrictions throughout the month (Fig-
decline in real wages on consumption will be limited, since
ure 3). We expect services consumption to rise further in the
excess savings as a result of large cash payouts will provide a
coming months, back close to the early 2020, pre-pandemic
solid base for consumption.
level, reflecting the recent normalization of business activity.
Durable goods consumption jumped 4.7%, the largest month- Figure 4: Total cash earnings (monthly)
ly gain since October 2021, but this was partial payback after %oya
the 5.4% plunge in February. With the persistent supply bot- 4 Constant sample
tlenecks, particularly for autos, durable goods consumption 3
has been volatile since late last year, and we expect this to 2
continue as automakers have announced some temporary fac- 1
tory shutdowns due to the supply shortage caused by the 0
Omicron wave in China. This strong durable goods consump- -1
tion, together with a modest 0.2% gain in nondurable goods -2 Official series
consumption, led to a total goods consumption rise of 1.0%, -3
after three consecutive monthly declines since December -4
2015 2016 2017 2018 2019 2020 2021 2022 2023
2021. Source: MHLW
38
This document is being provided for the exclusive use of Kurt Zhang at Huatai Financial Holdings (Hong Kong) Limited.
JPMorgan Securities Japan Co., Ltd. Economic Research
Ayako Fujita (81-3) 6736-1172 Global Data Watch
ayako.fujita@jpmorgan.com May 13, 2022
Yuka Mera (81-3) 6736-1167
yuka.mera@jpmorgan.com
Data releases and forecasts negative net external demand contribution, due to higher
imports of pharmaceuticals and other products.
Week of May 16 – 20
Thu Machinery orders
Mon Producer prices index May 19 %m/m, sa
May 16 %oya, nsa, 2015-based 8:50am Dec Jan Feb Mar
8:50am Jan Feb Mar Apr Total 1.8 -3.3 -10.6 __
Domestic PPI 9.2 9.7 9.5 9.7 Core private domestic orders1 3.1 -2.0 -9.8 5.0
(%m/m) 0.7 1.2 0.8 1.0 Manufacturing 3.5 -4.8 -1.8 __
Export prices 12.9 12.9 13.1 Core nonmanufacturing 0.4 -1.9 -14.4 __
Import prices 37.4 34.3 33.4 Public 1.5 -13.6 -5.3 __
We expect the producer price index (PPI) to rise 1.0%m/m, Foreign -2.8 0.9 -2.8 __
sa in April and, given the recent run of strong PPI increas- 1. Domestic private sector, ex for ships and from utilities
es, annual PPI inflation to mark 9.7%oya. Although PPI in- We project core domestic machinery orders to rise
flation had eased slightly in March reflecting the recent 5.0%m/m, sa in March, in partial payback after a 9.8%
moderation of import prices, we look for it to accelerate plunge in February. The Omicron wave since the begin-
again in response to the recent sharp yen depreciation. ning of the year, coupled with lingering supply bottlenecks,
caused orders to fall sharply in January and February, but
Wed Reuters Tankan survey
some of this decline likely will be reversed in March, re-
May 18 Diffusion index
flecting the gradual normalization of economic activity
8:00am Feb Mar Apr May
starting that month. Nevertheless, we expect 1Q22 core
Manufacturing 6 8 11 11
private orders to contract for the first time since 1Q21.
Nonmanufacturing 3 -1 8 10
In the May Reuters Tankan, we expect the current condi- Thu Customs-cleared international trade
tions DIs to move sideways in the manufacturing index, May 19
but rise in the nonmanufacturing index for the second con- 8:50am Jan Feb Mar Apr
secutive month. We think the manufacturing index will Balance (¥bn sa) -792 -1067 -900 -1222
remain unchanged at 11 in April, reflecting renewed con- Exports %m/m 0.9 -0.4 1.7 4.1
cern about supply bottlenecks and cost pressures caused by Imports %m/m 5.8 3.0 -0.5 7.5
the war in Ukraine and an extension of lockdown measures Balance (¥bn nsa) -2199 -670 -412 -938
in China. Meanwhile, we expect the nonmanufacturing in- Exports %oya 9.6 19.1 14.7 14.5
dex to rise from 8 in April to 10, in response to the ongo- Imports %oya 38.8 34.1 31.2 31.7
ing normalization of business activity after the late-March BoJ real export index -0.7 1.4 0.7 -1.2
lifting of the COVID-19 quasi-emergency measures. BoJ real import index 2.6 0.6 -2.4 0.5
Wed GDP - 1st estimates We expect the nominal trade deficit to expand in April.
Based on the first-20-days’ customs trade data, we project
May 18 %q/q, saar
real exports to decline after two consecutive monthly in-
8:50am 3Q21 4Q21 1Q22
creases, falling 1.2%m/m, sa. We look for real imports to
Real GDP -2.8 4.6 0.3 rise 0.5%, only a small increase even after the March de-
Private consumption -3.8 10.0 0.2 cline reflecting the supply shortages. We estimate that BoJ
Residential investment -6.3 -3.8 3.0 real exports, the proxy for GDP-based real trade, fell
Bus. capital investment -9.3 1.4 -1.0 1.2%m/m, sa, while imports rose 0.5% in April.
Government consumption 4.5 -1.4 5.0
Public investment -11.6 -14.4 0.0 Fri Nationwide consumer prices
May 20 2020-based
Exports -1.2 3.8 6.0
8:30am Jan Feb Mar Apr
Imports -3.8 -1.5 10.0
%oya
%-pt contrib. to q/q saar GDP growth
Overall 0.5 0.9 1.2 1.9
Domestic final sales -3.5 4.2 1.1
Core (ex. fresh food) 0.2 0.6 0.8 1.9
Net exports 0.5 1.0 -0.7 Core (ex. fresh food and energy) -1.1 -1.0 -0.7 0.6
Inventories 0.2 -0.6 -0.8 Core (ex. food and energy) -1.9 -1.8 -1.6 0.2
GDP deflator (%oya) -1.2 -1.3 -1.1 %m/m, sa
We expect the first estimate of 1Q22 real GDP to show Overall 0.1 0.5 0.4 0.1
weak growth momentum in response to the Omicron wave Core (ex. fresh food) 0.0 0.4 0.4 0.3
since the beginning of the year. We expect real GDP Core (ex. fresh food and energy) 0.1 0.2 0.2 0.2
growth to slow significantly to 0.3%q/q, saar, in 1Q22 Core (ex. food and energy) -0.1 0.0 0.2 0.2
from 4.6% in 4Q21. Domestic private demand likely will We forecast that the core CPI (ex. food & energy) rose
be weak, as we expect private consumption to remain al- 0.2%m/m, sa in April after a 0.2% rise in March. We look
most flat under the quasi-emergency measures, while ris- for core goods prices to have risen firmly, reflecting the
ing uncertainty in the nonmanufacturing sector and pro- lagged effect of the increase in imported durable goods
longed supply constraints in the manufacturing sector are prices. Moreover, in oya terms, since the large drag from
also likely to have dragged on capex. We also expect a the sharp reduction of mobile phone charges should drop
39
This document is being provided for the exclusive use of Kurt Zhang at Huatai Financial Holdings (Hong Kong) Limited.
JPMorgan Securities Japan Co., Ltd. Economic Research
Ayako Fujita (81-3) 6736-1172 Japan
ayako.fujita@jpmorgan.com May 13, 2022
Yuka Mera (81-3) 6736-1167
yuka.mera@jpmorgan.com
out of the annual inflation calculation from April, we ex- rower services deficit reflecting the recovery of service activity
pect the core measure to turn positive for the first time in a from the pandemic-related plunge.
year, rising 0.2%oya. Meanwhile, we expect the core CPI
(ex. fresh food) to rise 0.3%m/m, sa, leaving the oya rate at Bank lending (May 12)
1.9%, very close to 2%, in April, buoyed by energy and %oya
food prices. We project electricity and gas prices to accel- Feb Mar Apr
erate further in April reflecting the lagged effect of past oil Bank lending 0.3 0.5 ___ 1.1
price rises. %m/m, sa by J.P. Morgan 0.2 0.2 ___ 0.2
Bank lending edged up 0.2%m/m, sa in April (seasonally ad-
Review of past week’s data justed by J.P. Morgan), leaving annual loan growth at 1.1%oya
Employers’ survey – preliminary (May 9) after a 0.5% increase in March. Reflecting a moderation in
firms’ demand for operating funds during the pandemic, bank
%oya, official base
lending had slowed since 2Q21, especially lending at major
Jan Feb Mar banks, which mainly target large firms. However, lending start-
Monthly wages per employee 1.1 1.2 1.0 1.2 ed to increase again in late 2021 reflecting an increase in the
Scheduled earnings 0.9 0.8 ___ 0.5 value of foreign currency-denominated loans due to yen depre-
Full-timers monthly 0.8 0.8 ___ 0.6 ciation, and recently marked a historical high. Having said that,
Part-timers hourly 0.4 2.0 ___ 1.8 according to the BoJ, firms’ demand for funds hasn’t been ris-
Overtime payments 4.3 4.9 ___ 2.5 ing much, even in the lending at regional banks, which tend to
Special payments 2.3 8.1 ___ 10.7 target small and medium-sized firms. Therefore, excluding the
impact of yen depreciation, we continue to expect bank lending
Real wages (total) 0.5 -0.1 ___ -0.2
to slow in 2022, as economic activity gradually normalizes.
See main essay.
Economy Watchers survey (May 12)
Consumption activity index (May 11) DI
%m/m, sa
Feb Mar Apr
Jan Feb Mar
Current conditions (sa) 37.7 47.8 51.0 50.4
CAI (BoJ) -3.7 -3.4 -1.1 -1.5 ___ 1.9
Households (sa) 33.7 46.8 ___ 49.6
See main essay.
Business (sa) 43.1 45.5 ___ 47.4
Real private consumption composite index (May 11) Employment (sa) 52.1 59.5 ___ 62.6
%m/m, sa See main essay.
Dec Jan Feb
Source: BoJ, CAO, EJCS, JADA, JCSA, JDSA, JFA, JLM, VMA, Markit, METI, MHLW, MILT,
Cabinet office index 0.1 0.3 -0.3 -0.6 ___ -1.2 MoF, Reuters, Statistics Bureau, J.P. Morgan forecast
See main essay.
Balance of payments (May 12)
¥bn sa
Jan Feb Mar
Current account 184 179 517 522 489 1556
Trade balance -399 -775 -761 ___ -562
Exports 7360 7559 7572 ___ 7661
Imports 7759 7758 8334 8333 ___ 8223
Services -610 -607 -416 -419 ___ -467
Primary income 1371 1364 1994 1988 ___ 2820
Secondary income -178 -179 -286 ___ -235
Current account -1196 1648 758 2549
The March current account surplus expanded to ¥1,556 billion
(3.5% of GDP, annualized) from ¥522 billion (1.2%) in Febru-
ary. This was mainly due to the larger primary income balance,
which reflected a temporary increase in direct income receipts
due to a large dividend receipt from an overseas subsidiary at
the end of the fiscal year. Meanwhile, the trade balance deficit
narrowed in March, reflecting the increase in exports supported
by the economic reopening in DM countries, and decline in im-
ports due to supply bottlenecks. Ahead, we project the current
account surplus to narrow to 2.1% of GDP in 2022 from 2.9%
in 2021. The merchandise trade surplus likely will slide into
deficit in 2022 on strong imports reflecting the deterioration of
the terms of trade due to the surge in energy prices. This deficit
likely will be partly offset by a modest rise in the primary in-
come surplus in response to yen depreciation and a slightly nar-
40
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JPMorgan Chase Bank NA Economic Research
Silvana Dimino (1-212) 834-5684 Global Data Watch
silvana.dimino@jpmorgan.com May 13, 2022
Gopal Kumar (91-22) 6157-3080
gopal.x.kumar@jpmchase.com
Despite the constructive signaling, we believe growth in Figure 2: Value of building permits
the current quarter will decelerate %,3m/3m, saar
In a light week for data, we note that our Nowcaster is signal- -25
ing upside risk to our 1H22 forecasts—modest upside risk to
our 5.0%ar 1Q22 real GDP forecast but significant upside risk -50
to our 3.5%ar growth forecast for the current quarter. Indeed, 2015 2016 2017 2018 2019 2020 2021 2022 2023
Source: Statistics Canada, J.P. Morgan
the momentum at the end of the first quarter is very favorable.
The early reads on manufacturing and retail sales indicate
they rose in March creating a solid trajectory at the start of the Fossil fueling activity
second quarter in those key activity indicators. However, we The dramatic increase in energy prices over the past few
believe growth is likely to decelerate this quarter. We believe months has pushed up headline inflation. The increase has
the purchasing power squeeze and tightening financial condi- taken a bigger slice out of family budgets and raised the cost
tions will temper growth in real consumer spending and resi- of doing business in myriad industries. Higher prices appear
dential investment. The tightening is spilling over into less- to be boosting activity in the energy sector and sentiment in
supportive loan supply. This is backed up by the BoC’s 1Q22 the energy-based provinces. Demand for rigs in the last two
Senior Loan Officer Survey, which showed a general move months has risen dramatically (Figure 3) and the summer
toward less easing in lending standards. We think the tighten- drilling season appears to have started earlier than usual. On
ing in financial conditions is weighing on consumer sentiment our seasonal adjustment the rig count in April (oil and gas
(Figure 1). combined) was up 42% following a 23.5% increase in March.
Figure 1: Economic mood among homeowners and renters Past correlation suggests this is an important tailwind for real
diffusion index GDP growth in March and April.
70 Figure 3: Real extraction output in the GDP accounts and rig count
65 Homeowners #, sa by JPM %ch, m/m, sa
60 rigs (lagged 1 mth)
40 15
55
20 10
50 Renters
5
45 0
40 0
-20
35 Real oil & gas -5
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 -40 extraction output
Source: Bloomberg Finance L.P./Nanos Research Corporation, J.P. Morgan
-10
-60 -15
2016 2017 2018 2019 2020 2021 2022 2023
The one notable release this week wrapped up building inten- Source: Baker Hughes, Statistics Canada, J.P. Morgan
tions in the first quarter. The quarterly growth rate surged
23%ar (19% in real terms) as a substantial increase in nonres- The surge in activity has led to a jump in employment, which
idential permits last quarter offset a decline in residential has already returned to pre-pandemic levels along with capac-
permits (Figure 2). The strong growth built on a close to ity utilization in the sector. The positive impact can be seen in
50%ar increase in the fourth quarter. These permits are for- other parts of the economy. Increased sales of petroleum and
ward-looking and a favorable harbinger of future new con- coal products pushed up sales of manufactured products in
struction. Permits can be quite volatile and two large projects nominal terms in all three months of the first quarter.
boosted values last quarter. Nevertheless, as the construction
proceeds it will continue to boost real GDP growth and the
data potentially signal increasing expectations for business
41
This document is being provided for the exclusive use of Kurt Zhang at Huatai Financial Holdings (Hong Kong) Limited.
JPMorgan Chase Bank NA Economic Research
Silvana Dimino (1-212) 834-5684 Canada
silvana.dimino@jpmorgan.com May 13, 2022
Gopal Kumar (91-22) 6157-3080
gopal.x.kumar@jpmchase.com
42
This document is being provided for the exclusive use of Kurt Zhang at Huatai Financial Holdings (Hong Kong) Limited.
Banco J.P.Morgan, S.A., Institución de Banca Múltiple, Economic Research
J.P.Morgan Grupo Financiero Global Data Watch
Gabriel Lozano (52-55) 5540-9558 May 13, 2022
gabriel.lozano@jpmorgan.com
Steven Palacio (52 55) 5382-9651
steven.palacio@jpmorgan.com
This week Banxico hiked its reference rate 50bp to 7%, from
6.5%. While the decision was widely expected, some uncer- Figure 2: Banxico vs. Fed policy rate outlook
%
tainty remained in terms of the bias of the statement and 9.0 8.75 4.0
whether some members, or at least one, would push for a 8.25
more aggressive action given the behavior of inflation (and 8.0 3.25 3.0
Banxico
expectations). In the end, and in our view, the statement was
2.75 7.75
outright hawkish in terms of the main inflation concerns for 7.0 FOMC 2.0
the board (inflation expectations, core inflation persistence,
and inertial forces at play) in the context of a challenging 6.0 1.0
global policy outlook. All in, we now see Banxico staying in
the 50bp camp for a little longer, with 50bp hikes in June and 5.0 0.0
August. Jan 22 Apr 22 Jul 22 Oct 22 Jan 23 Apr 23 Jul 23 Oct 23
Source: J.P. Morgan forecasts. Updated May 12 (Banxico) and May 4 (FOMC)
43
This document is being provided for the exclusive use of Kurt Zhang at Huatai Financial Holdings (Hong Kong) Limited.
Banco J.P.Morgan, S.A., Institución de Banca Múltiple, Economic Research
J.P.Morgan Grupo Financiero Mexico
Gabriel Lozano (52-55) 5540-9558 May 13, 2022
gabriel.lozano@jpmorgan.com
Steven Palacio (52 55) 5382-9651
steven.palacio@jpmorgan.com
Figure 3: PPI and core goods CPI in the sector hit a three-year high, and national and external
%oya demand were equally solid. In other details, construction
10 jumped 3.2%m/m and mining was down 0.6%.
PPI* (t+3)
8 The downside miss in IP leaves the trajectory into 2Q looking
6 weaker than expected, with industrial output tracking a rough-
ly 0.7%ar decline early in the quarter. But, as said, April data
4 should reset this trajectory. Outside IP news has been more
Core goods
2 upbeat, specifically regarding the services sector. Survey-
based demand and income perceived by firms surged, as busi-
0 ness-related services are finally recovering from the labor
Jan 06 Jan 09 Jan 12 Jan 15 Jan 18 Jan 21
Source: INEGI. *PPI of goods destined to consumption. regulation-induced dip that took hold in late 3Q. But other
service-sector industries also printed on the strong side.
Hence, while this week’s data were disappointing, we remain
We keep our forecast unchanged, with inflation still tracking
confident in our call for 2.5%ar GDP growth this quarter.
our projection of headline inflation at 7% and core prices at
7.2%. The likelihood of a sharp correction to the downside on
the back of the Price Plan is quite low in our view, and we Data releases and forecasts
believe the impact on annual inflation will not exceed 50bp. Week of May 16 - 20
Of note, we already anticipated a partial policy-induced cor- No data releases.
rection when we cut our 2022 forecast to 7%.
-1
-2
Oct 21 Nov 21 Dec 21 Jan 22 Feb 22 Mar 22
Source: INEGI
That said, survey data were very robust across the board in
April, hence we expect output to have bounced back at the
beginning of 2Q. In particular, the IMEF output PMI was
strong, as were new orders. Furthermore, business confidence
44
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Banco J.P. Morgan S.A. Economic Research
Cassiana Fernandez (55-11) 4950-3369 Global Data Watch
cassiana.fernandez@jpmorgan.com May 13, 2022
Vinicius Moreira (1-212) 834-4144
vinicius.moreira@jpmorgan.com
across the board. Core inflation was the highest since 2003 in
Brazil April and the recent IPCA releases were significantly higher
COPOM meeting minutes left BCB with options for the than BCB’s scenarios by March and even suggest upside risks
next steps to our higher-than-consensus call for inflation ending 2022 at
9.1%. A potential source of downside risk to this forecast is
Economic growth has been stronger than expected in that the government and Congress enact measures to curb or
1Q, but performance in 2H22 will deteriorate cut controlled prices, such as fuel and electricity.
We now forecast 1Q GDP rose 4.2%q/q, saar and GDP
will expand 1%y/y in 2022 Uncertainty in the land of uncertainty
We continue seeing the IPCA at 9.1% this year and In a more dovish message in the statement, the COPOM dis-
4.2% in the next, both above the targets for these years cussed that the monetary tightening already implemented was
quite intense and that much of its effect is still to be seen. The
Committee also highlighted that the tightening of financial
The COPOM minutes of last week’s meeting came out with a conditions poses some downside risk to activity going for-
balanced tone, reinforcing the uncertainty about the outlook
ward.
for inflation and growth. The COPOM again avoided more
explicit guidance on the terminal SELIC rate, giving the
By contrast, the COPOM acknowledged an additional deterio-
Committee more degrees of freedom to adjust the message as
ration in both short-term inflationary dynamics and the long-
the upcoming data and news are released. At this point, we
er-term projections, which despite the uncertainty of the mo-
still see the cycle ending with an additional 50bp hike in June
ment we believe justifies the message of a more prolonged
at 13.25%, but now with upside risks, given the strength of
cycle, versus previous guidance. In addition, the members of
activity and inflation.
the Committee discussed that global inflationary pressures
intensified due to high demand and supply shocks, and debat-
The economic fundamentals continue suggesting that a hawk-
ed that the differences between the COPOM scenarios and the
ish approach is appropriate. March retail sales and services
analysts’ projections may come from a slower reversal in in-
output were significantly stronger than we expected, reinforc-
dustrial goods inflation, different assumptions of neutral rates,
ing the surprising strength of economic growth in 1Q. We
and different assumptions about oil price dynamics.
then raised our 1Q GDP estimate from 2.4%q/q, saar to 4.2%,
pulling the 2022 GDP forecast up to 1%y/y from 0.6% before.
The crosscurrents of these effects probably led the COPOM to
While this stronger-than-expected outcome was in line with
give a more cautious message on the pace of tightening. As in
BCB’s view, we still think headwinds will prevent Brazil’s
last week’s statement, the COPOM reiterated that it is likely
GDP from growing strongly this year. Our models suggest
to extend the tightening cycle with a smaller adjustment in the
that the effect of tighter real rates will start impacting eco-
next meeting to anchor long-term inflation expectations and
nomic growth particularly in the second half of this year. Al-
ensure the convergence of inflation to the target. This overall
so, the global deceleration underway, particularly in EM Asia,
seems in line with our call for a final 50bp in June at 13.25%.
should weigh on Brazil as well through trade and confidence.
We thus have kept our 2Q-4Q forecasts unchanged (Figure 1).
No relief in April CPI
Figure 1: GDP 2021-2022 quarterly forecasts Not only did the IPCA rise 1.06%m/m, higher than the con-
%q/q saar sensus of 1.01% and our call of 0.96%, but also core IPCA
New Old
5 4.2 rose 0.93%, 15bp above our call. Most of the surprise came
4 2022 old: +0.6% from food and hygiene goods prices. Even though the month-
2.4 2022 new: +1.0%
3 ly IPCA decelerated from March to April, seasonally adjusted
2 core inflation increased 1.06%m/m, sa, the highest monthly
1 0.0 0.0 rise since 2003, from 1% in March. As a result, the IPCA ac-
0 celerated from 11.3%oya to 12.1% in April with the core
-1 moving from 8.5%oya to 9.2% and reaching 12.4%3m/3m,
-2 -1.2 -1.2 saar (Figure 2).
-1.8 -1.8
-3
22Q1 22Q2 22Q3 22Q4
Source: J.P. Morgan Last week, we revised up our 2022 IPCA forecast to 9.1%,
largely on the back of expectations of a significant hike in
gasoline prices this week, but only a diesel price hike of 8.9%
Meanwhile, there have been no meaningful signals of relief of
was announced with negligible direct impact on the IPCA.
inflationary pressures, with multi-year record-high numbers
45
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Banco J.P. Morgan S.A. Economic Research
Cassiana Fernandez (55-11) 4950-3369 Brazil
cassiana.fernandez@jpmorgan.com May 13, 2022
Vinicius Moreira (1-212) 834-4144
vinicius.moreira@jpmorgan.com
Given the still-elevated gap between domestic and foreign us to upgrade our 1Q GDP growth forecast from 2.4%q/q,
gasoline prices, we continue expecting additional gasoline saar to 4.2% (Figure 4).
price hikes this year. We now look for hikes of 6% in June
and 5% in November, smoothing the adjustment throughout Figure 4: Brazil 1Q nowcaster 1Q forecast
the year, and keeping our year-end forecast at 9.1%. If this %q/q, saar
1Q nowcaster
bears out, IPCA inflation peaked in May at 12.1%oya and 5
4.2
should starting trending down from now onwards (Figure 3). 4
However, the peak—as happened at the end of last year and
beginning of this year—depends on the timing and magnitude 3 2.4 2.4 2.4
of this potential gasoline price increase; an earlier and strong- 2
er price hike could postpone the peak level to June. 1.2 1.2 1.2 1.2 1.2 1.2
1 0.4 0.4 0.6 0.6 0.6 0.6 0.6
Figure 2: BCB average of core metrics (IPCA)
0
%change 7-Jan-22 7-Feb-22 7-Mar-22 7-Apr-22 7-May-22
14 %3m/3m saar Source: J.P. Morgan
12 %oya
10 Data releases and forecasts
8
Week of May 16 – 20
6
4 Tue Wholesale prices (IGP-10)
Headline
2 IPCA target May 17 Feb Mar Apr May
7:00am %m/m 1.98 1.18 2.48 0.15
0
12 14 16 18 20 22 %oya 16.69 14.63 15.65 12.20
Source: IBGE, BCB, and J.P. Morgan
Figure 3: Headline and core IPCA forecasts Review of past week’s data
%oya IPCA Retail sales
13 Jan Feb Mar
12 Core %m/m, sa 2.4 1.3 0.0 1.0
11
10 Core %oya, nsa -1.5 1.3 1.8 4.1
9 Broad %m/m, sa 0.4 2.1 -1.6 0.7
8 Broad %oya, nsa -1.4 0.3 0.3 4.5
7 Target ceiling
6
5
4
3 Core Consumer prices (IPCA)
2
1 Feb Mar Apr
2018 2019 2020 2021 2022 2023 %m/m 1.01 1.62 0.96 1.06
Source: IBGE, BCB, and J.P. Morgan %oya 10.54 11.30 12.02 12.13
46
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J.P. Morgan Securities LLC Economic Research
Diego W. Pereira (1-212) 834-4321 Global Data Watch
diego.w.pereira@jpmorgan.com May 13, 2022
Lucila Barbeito (54-11) 4348-7229
lucila.barbeito@jpmorgan.com
Headline CPI logged 6.0%m/m in April (58%oya), a bit We continue to mark our Dec-22 inflation forecast higher to
above our expectations (5.9%m/m), and BCRA’s survey con-
70%oya, and still flag that risks remain skewed to the upside
sensus (5.6%). The monthly print thus decelerated from
in the absence of structural anchors. Our baseline assumes 2Q
March’s peak (6.7%) but is still well above the already-high
inflation averages 4.8%m/m, and decelerates to a still-high
1Q22 average of 5.1% (Figure 1). YTD inflation logged
4.1%m/m monthly average in 2H22 assuming pressures from
at 23.1% (compared to 17.5% in same period last year).
international prices ease and without additional utility tariff
price adjustments. Yet, admittedly, the risks are that wage
Figure 1: Headline and core National-CPI
%m/m pressures and further fuel price increases push headline infla-
8.0 Headline
tion even higher in 2H22, despite the expected slowdown in
7.0 the crawling peg and the tightening of price controls. Of note,
6.7
6.0 Core 6.0 half of the unions have already closed wage negotiations with
5.0 increases above 55% (59.5% on average YTD), while the
4.0 other half will revise their agreements between June and Sep-
3.0 tember. We thus still flag upside risk to our revised 70%oya
2.0 Dec 22 forecast.
1.0
Low-dose monetary policy not enough to
Jan-17
Apr-17
Jul-17
Oct-17
Jan-18
Apr-18
Jul-18
Oct-18
Jan-19
Apr-19
Jul-19
Oct-19
Jan-20
Apr-20
Jul-20
Oct-20
Jan-21
Apr-21
Jul-21
Oct-21
Jan-22
Apr-22
47
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J.P. Morgan Securities LLC Economic Research
Diego W. Pereira (1-212) 834-4321 Argentina
diego.w.pereira@jpmorgan.com May 13, 2022
Lucila Barbeito (54-11) 4348-7229
lucila.barbeito@jpmorgan.com
-10
Feb-20 Jun-20 Oct-20 Feb-21 Jun-21 Oct-21 Feb-22
Source: BCRA and J.P.Morgan
Trade balance
Thu Jan Feb Mar Apr
May 19 $bn 0.3 0.8 0.3 1.0
Primary deficit
Fri Jan Feb Mar Apr
May 20 ARS$bn -16.7 -76.3 -99.7 -130.0
48
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J.P. Morgan Securities LLC Economic Research
Ben Ramsey (1-212) 834-4308 Lucila Barbeito (54-11) 4348-7229 Global Data Watch
benjamin.h.ramsey@jpmorgan.com lucila.barbeito@jpmorgan.com May 13, 2022
Diego W. Pereira (1-212) 834-4321 Katherine Marney (1-212) 834-2285
diego.w.pereira@jpmorgan.com katherine.v.marney@jpmorgan.com
Colombia: Tax revenue surpassing targets Last Wednesday the Congress approved the ability to with-
draw up to PEN18,400 (4 UIT) from pension savings in the
On the positive side for Colombia, the tax agency has un-
private capitalization pillar, with 107 votes in favor, eight
veiled that gross tax revenue reached a cumulative
against and two abstentions,. As we discussed days
COP$74.53tn (5.6% GDP) between January and April. This
ago, lawmakers are hoping that this measure will help allevi-
level means that year-to-date tax revenue reached 114.6% of
ate the great economic stress produced by the COVID-19
the target set for the period, or 37.9% of the total tax revenue
pandemic. But lawmakers are disregarding any nega-
target for 2022. Tax revenue between January and April 2022
tive impact on financial stability and inflation. In
is 34.6% above the 2021 level, likely reflecting strong mo-
fact, reflecting the populist leanings of the region, lawmakers
mentum for nominal GDP stemming both from real activity
approved the sixth withdrawal of funds against the advice of
and higher prices (Figure 1).
technical entities such as the Ministry of Economy, the
Figure 1: Cumulative Nominal Gross Tax Revenue BCRP, or the Superintendence (SBS).
COP$trn
250 Tax revenue target for The Executive will now evaluate the law, and has 15 days to
2022: 196.7
Ytd tax revenue in April reached present observations on the proposal to Congress. If after 15
200 114.6% of the cumulative target
2021 days the president has not formalized any observations, the
150 2019 law is enacted.
100 2020
2022 The BCRP Board hiked the policy rate by 50bp, to 5.0%, in
50 line with our base case. In the statement the Board maintained
the wording associated with the normalization of the mone-
0
tary stance, amid tradable inflationary pressures from food
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Source: DIAN, Finance Ministry update of the Financing Plan for 2022 and energy. Headline inflation climbed to 7.96%oya in April
while inflation excluding food and energy also rose, although
by less, to 3.8%oya. Yet, core inflation also ran above the
Cumulative YTD tax revenue has consistently surpassed the
upper limit of the inflation target range (see “Headline CPI
target set for each period through 2021, and this metric con-
scratched 8%oya in April”). That said, the BCRP maintained
tinued to increase for the first months of 2022. The trend sug-
the projection for headline inflation to return to the target
gests that total tax revenue for 2022 is on track to surpass the
range by 2Q-3Q23, with a downward trend beginning in July.
total target for 2022 of COP$196.7 (14.8% of GDP, though
we would note that our forecast for nominal GDP has risk for
Therefore, the BCRP insists on pursuing a stable tightening
an upward revision). Naturally though, a sufficiently strong
pace, of 50bp per meeting, aiming to prevent additional infla-
confidence shock or an economic downturn could derail this
tion expectations from deanchoring, taking comfort in the
trend.
observed gap between headline and core inflation. But that
strategy has, so far, failed. Indeed, the latest BCRP survey
Peru: Risk premia, withdrawals, and mone- showed a spike in the next-12-month inflation expectations, to
tary policy 4.62% from 4.39% a month ago. Moreover, inflation for end-
The first attempt to convene a Constituent Assembly dis- 2023 was also revised higher, by 20bp to 3.2% (economic
solved in the Congress. Last Friday, the Constitutional Com- analysts) and by 50bp to 4% (non-financial firms). Economic
mission of the Congress archived the constitutional reform agents are thus not only assuming higher inflation, but more
project presented by the Executive, which proposed calling a
49
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J.P. Morgan Securities LLC Economic Research
Ben Ramsey (1-212) 834-4308 Lucila Barbeito (54-11) 4348-7229 Andeans
benjamin.h.ramsey@jpmorgan.com lucila.barbeito@jpmorgan.com May 13, 2022
Diego W. Pereira (1-212) 834-4321 Katherine Marney (1-212) 834-2285
diego.w.pereira@jpmorgan.com katherine.v.marney@jpmorgan.com
persistence, likely associated with the high likelihood that the Chile
new pension fund withdrawal will be enacted. Data releases and forecasts
Week of May 16 – 20
In terms of monetary policy ahead, we now forecast the policy
Current account
rate to climb to 6.0% by July. If the sixth pension fund with-
Wed 2Q21 3Q21 4Q21 1Q21
drawal is finally enacted as passed in Congress, the central May 18 $bn -3.2 -6.9 -7.6 -2.8
bank is expected to offer repos to help alleviate the liquidity
pressures stemming from pension funds asset selling, and to GDP
take a proactive stance in the exchange rate market, if need Wed 2Q21 3Q21 4Q21 1Q21
be. May 18 %oya 18.9 17.2 12.0 7.9
The author wishes to thank Juan Goldin, of the Latin America Review of past week’s data
Economics Research team, J.P.Morgan Chase Bank Sucursal
Buenos Aires, for his contribution to this report. Trade balance
Feb Mar Apr
%oya 0.2 1.3 1.0 1.1
Colombia
Source: INE, CBC, and J.P. Morgan estimates
Data releases and forecasts
Week of May 16 - 20 Peru
Data releases and forecasts
GDP growth
Week of May 16 – 20
May 2Q21 3Q21 4Q21 1Q22
Mon 16 %oya, sa 17.5 13.3 10.7 7.8 Economic activity
%q/q, sa -3.20 6.06 4.27 0.74 Mon Dec Jan Feb Mar
May 16 %oya 1.7 2.9 4.9 4.6
Economic activity ISE
Mon Dec Jan Feb Mar
May 16 %oya, sa 11.7 7.7 7.9 8.8 Unemployment
Mon Jan Feb Mar Apr
May 16 % 8.6 8.9 9.4 9.0
Trade balance
Mon Dec Jan Feb Mar
May 16 $bn -1.1 -1.7 -1.1 -1.1 Review of past week’s data
Imports Policy rate
Mon Dec Jan Feb Mar Mar Apr May
May 16 $bn 6.2 6.1 5.8 6.6 % 4.00 4.50 5.00 5.00
Retail sales
Jan Feb Mar
%oya 21.0 4.9 8.0 12.0
Industrial production
Jan Feb Mar
%oya 14.7 10.7 4.5 12.3
50
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J.P. Morgan Securities plc Economic Research
Allan Monks (44-20) 7134-8309 Global Data Watch
allan.j.monks@jpmorgan.com May 13, 2022
GDP in March fell 0.1%m/m. We revise down 2Q GDP, GDP rose 0.8%q/q in 1Q, led by stronger domestic demand.
but still look for positive growth overall. The March outturn As discussed above, a weaker March print combined with
was weaker than our forecast for a 0.1%m/m gain, and the downward revisions to prior months led to GDP for the
consensus expectation for a flat outturn. The underlying de- quarter undershooting expectations (JPM and consensus:
tails were worse still, as a 1.7%m/m surge in construction 1.0%; BoE: 0.9%. Consumption grew 0.6%, with public
output masked declines of 0.2%m/m in both manufacturing consumption down 1.7% (reflecting lower COVID-related
and services. The drop in services was the bigger disap- activity) and gross fixed investment rising 5.4% due to a
pointment. While falling COVID-related spending did large 23.6% boost from public spending. Meanwhile, busi-
shave 0.2%-pt off growth, there was a larger boost from ness investment continued to fall by 0.5%. Strength in do-
other health-related activity including GP appointments. mestic demand was offset by a 4% non-annualized drag
Under the surface, private sector services output was weak from net trade. The ONS has highlighted the difficulties it
with consumer-facing services falling 1.8%. This did reflect encounters in compiling the demand-side data in this report,
concentrated weakness from a 15.1% drop in motor trades, and has indicated caution is necessary when interpreting the
however, which shaved nearly 0.3%-pt off monthly GDP. move in 1Q trade flows due to changes in data collection
Other consumer services continued to grow even as retail procedures. As such, a large statistical alignment factor has
trade declined, consistent with the message we have taken been used to balance the demand side with output, and any
51
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J.P. Morgan Securities plc Economic Research
Allan Monks (44-20) 7134-8309 United Kingdom
allan.j.monks@jpmorgan.com May 13, 2022
52
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J.P. Morgan Securities plc Economic Research
Allan Monks (44-20) 7134-8309 Global Data Watch
allan.j.monks@jpmorgan.com May 13, 2022
53
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J.P. Morgan Securities plc Economic Research
Allan Monks (44-20) 7134-8309 United Kingdom
allan.j.monks@jpmorgan.com May 13, 2022
Trade balance
£bn, sa
Jan Feb Mar
Total -12.8 -11.8 -9.3 -9.2 -11.6
Goods -23.9 -24.0 -20.6 -21.6 -23.9
Services 11.1 12.3 11.3 12.4 12.3
Source: Rightmove, CBI, BBA, BCC, GFK, BRC Markit, SMMT, RICS, Land Registry, ONS, BoE,
and J.P. Morgan
54
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J.P. Morgan Securities plc Economic Research
Nicolaie Alexandru-Chidesciuc (44 José Cerveira (44-20) 7742-3556 Global Data Watch
20) 7742-2466 jose.a.cerveira@jpmorgan.com May 13, 2022
nicolaie.alexandru@jpmorgan.com Jessica Murray (44-20) 7742 6325
Yarkin Cebeci (44-20) 7134-7547 jessica.x.murray@jpmorgan.com
yarkin.cebeci@jpmorgan.com
55
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J.P. Morgan Securities plc Economic Research
Nicolaie Alexandru-Chidesciuc (44 José Cerveira (44-20) 7742-3556 Emerging Europe
20) 7742-2466 jose.a.cerveira@jpmorgan.com May 13, 2022
nicolaie.alexandru@jpmorgan.com Jessica Murray (44-20) 7742 6325
Yarkin Cebeci (44-20) 7134-7547 jessica.x.murray@jpmorgan.com
yarkin.cebeci@jpmorgan.com
not showing any signs of letting up, we raise our terminal rate Figure 2: CE4 policy rate paths
forecast. We now see the NBH lifting the 1-week depo rate to %
10
8.5% in 3Q22 (7.5% previously), with the base rate eventually 9 POL
catching up. 8
CZE
7
6 HUN
Romania: April CPI makes life hard for the 5 ROM
NBR 4 J.P. Morgan
3 forecast
The National Bank of Romania (NBR) hiked 75bp to 3.75% 2
as we expected; consensus was 50bp. The corridor remained 1
0
at 200bp and no other operational changes were made. The Jan- Jun- Dec- Jun- Dec- Jun- Dec- Jun- Dec- Jun- Dec-
step up in size of the increase (previously in this cycle, NBR 19 19 19 20 20 21 21 22 22 23 23
Source: CNB, NBH, NBP, NBR, J.P. Morgan
has hiked only in increments of 50bp or less) was accompa-
nied by a statement showing somewhat more concern around
the inflation outlook, mentioning that the new inflation fore- For the next rate meeting, on July 6, we now expect a 100bp
cast is in double-digit territory until 2H23. We share this view rate hike (previously 50bp). We also expect a 100bp hike at
and believe that inflation will remain elevated in 2023 with the August rate meeting, when a new inflation report is re-
headline around 8% and core likely around 7% at end-2023. leased. Even with this accelerated pace of hikes, we believe
that the NBR will not be able to attain the tight stance re-
The April CPI followed the rate decision and showed a spike quired by domestic fundamentals any time soon.
in the headline CPI driven by electricity and gas prices, but
also strength in core driven by processed food. Similar to Data releases and forecasts
CE3, there was a major upside surprise in Romania’s inflation Week of May 16 – 20
for April, which printed at 13.8%oya vs. 10.2% in March
(consensus: 11.1%). However, unlike the CE3, the move Hungary:
higher was driven by large hikes in energy prices despite the Tue Real GDP, preliminary
presence of the price cap; it is unclear how energy prices in- May 17 %oya, unless otherwise stated
creased by more than 26%m/m in April. This pushed energy 9:00am 2Q21 3Q21 4Q21 1Q22
inflation (for electricity, gas, and heating) to 40.8%oya from Real GDP 17.8 6.2 7.1 7.3
%q/q saar 9.2 3.8 8.3 8.0
11.7% in March. Adding to the upside surprise were both
food and fuel inflation, which were also stronger than ex-
Thu NBH 1-week deposit rate decision
pected. Core inflation, driven by processed food, jumped to
May 19 %
8.3%oya vs. 7.6% expected.
On hold: 6.45%
In our view, the main takeaway from the April CPI report is Source: NBH, National Statistics, Eurostat, J.P. Morgan forecasts
that it has become clear the NBR has made a policy mistake
by hiking less than other central banks in the region thus far. Israel:
Even though the NBR hiked 75bp this week, we are not sure
Sun Consumer prices
the bank is fully aware of the need to bring rates higher quick- May 15 %oya
ly. Reversing the policy mistake will not be easy and will 9:00am Jan Feb Mar Apr
likely be costly in terms of lost output over the medium term, %oya 3.1 3.5 3.5 3.8
due to the need to keep a tight monetary stance for an extend- %m/m, nsa 0.2 0.7 0.6 __
ed period of time. We now see end-2023 core inflation at
about 7% (5.4% previously) and headline CPI at 8% (7.6% Mon Real GDP, flash
previously). As a result, we revise our peak policy rate to 8%, May 16 %oya, unless otherwise stated
to be reached in 2023. We think risks are to the upside for 9:00am 2Q21 3Q21 4Q21 1Q22
Real GDP, nsa 17.5 5.0 11.1 10.3
both inflation and the key rate, and that the NBR will have to
%q/q, saar 15.7 7.0 17.8 1.6
keep a high key rate for an extended period of time, likely all
of 2024, too, if it wants to lower inflation back toward the Source: BOI, National Statistics, J.P. Morgan forecasts
target. This stands in stark contrast to the rest of CE4, where
we forecast rate cuts commencing in 2023 (Figure 2). Poland:
Mon Core inflation
May 16 %oya
56
This document is being provided for the exclusive use of Kurt Zhang at Huatai Financial Holdings (Hong Kong) Limited.
J.P. Morgan Securities plc Economic Research
Nicolaie Alexandru-Chidesciuc (44 José Cerveira (44-20) 7742-3556 Global Data Watch
20) 7742-2466 jose.a.cerveira@jpmorgan.com May 13, 2022
nicolaie.alexandru@jpmorgan.com Jessica Murray (44-20) 7742 6325
Yarkin Cebeci (44-20) 7134-7547 jessica.x.murray@jpmorgan.com
yarkin.cebeci@jpmorgan.com
2:00pm Jan Feb Mar Apr %q/q, saar 5.5 1.5 8.3 -2.0
CPI-ex food and energy 6.1 6.7 6.9 7.7
Source: Local authorities, CBR, J.P. Morgan forecasts
CPI-ex admin. prices 8.9 8.0 10.6 __
CPI-15% trimmed mean 7.0 7.0 7.8 __
Avg of 4 NBP measures 7.4 7.3 8.3 __ Turkey:
Mon Balance of payments
Tue Real GDP, preliminary May 16 US$ bn
May 17 %oya, 2005 prices 10:00am Dec Jan Feb Mar
10:00am 2Q21 3Q21 4Q21 1Q22 Current account -3.5 -7.0 -5.2 -5.0
Real GDP, nsa 11.3 5.5 7.6 8.2 Trade balance -5.0 -8.3 -6.0 -6.0
%q/q, saar 7.8 10.4 6.6 8.3 Exports 22.4 17.8 20.2 23.2
Imports 27.4 26.2 26.2 29.2
Fri Industrial output Net invisibles/transfers -10.7 -1.5 -0.5 1.0
May 20 %oya Capital account -0.4 -7.5 -3.4 __
10:00am Jan Feb Mar Apr Overall balance 13.8 0.9 2.2 __
Industry 18.0 17.3 17.2 __
%oya, swda by GUS 15.3 17.4 17.2 __ Source: CBRT, National Statistics, J.P. Morgan forecasts
57
This document is being provided for the exclusive use of Kurt Zhang at Huatai Financial Holdings (Hong Kong) Limited.
J.P. Morgan Securities plc Economic Research
Nicolaie Alexandru-Chidesciuc (44 José Cerveira (44-20) 7742-3556 Emerging Europe
20) 7742-2466 jose.a.cerveira@jpmorgan.com May 13, 2022
nicolaie.alexandru@jpmorgan.com Jessica Murray (44-20) 7742 6325
Yarkin Cebeci (44-20) 7134-7547 jessica.x.murray@jpmorgan.com
yarkin.cebeci@jpmorgan.com
Portfolio investments 172.6 -26.0 __ -42.2 Source: NBP, National Statistics, Eurostat, Markit, J.P. Morgan forecasts
Other investments -230.8 -36.1 __ 34.4
Consumer prices, final Source: NBR, National Statistics, Eurostat, Markit, J.P. Morgan forecasts
%oya, unless otherwise stated
Feb Mar Apr Russia:
%oya 8.5 11.0 12.3 12.4
%m/m, nsa -0.3 3.3 2.0 Consumer prices
Food 7.6 9.2 12.7 %oya, unless otherwise stated
Fuel 11.1 33.5 27.8 Feb Mar Apr
%oya 9.2 16.7 17.8
Balance of payments %m/m, nsa 1.2 7.6 1.6
EUR mn Source: Local authorities, CBR, J.P. Morgan forecasts
Jan Feb Mar
CA balance -638 -2871 -2663 __ -2972
YTD (bn) -0.6 -3.5 -3.3 __ -6.3 Turkey:
YTD-a year ago (bn) 2.8 3.1 __ 3.2 Industrial production
Trade balance -1669 -1741 -1559 __ -3253 %oya
Exports %oya 20.0 10.4 __ 16.2 Jan Feb Mar
Imports %oya 37.4 21.6 20.0 __ 34.3 Total 7.6 13.3 __ 9.6
Service balance 2354 2253 2310 __ 2102 Manufacturing 7.8 14.4 __ 10.7
Primary income -369 -2510 -2541 __ -1527 Mining 8.7 6.1 6.3 __ 2.9
Secondary income -954 -873 __ -294 Energy and utilities 5.6 4.9 __ 1.9
Fin + cap balance -848 -3398 -3230 __ -4184
FDI, net -4572 -1712 -2296 __ -2774 Source: CBRT, National Statistics, J.P. Morgan forecasts
58
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JPMorgan Chase Bank, N.A., Johannesburg Branch Economic Research
Sthembiso E Nkalanga (27-11) 507-0422 Global Data Watch
sthembiso.nkalanga@jpmorgan.com May 13, 2022
Sonja Keller (27-11) 507-0376
sonja.c.keller@jpmorgan.com
3.0
Core We believe firmer food prices also exacerbate cost pressures
in related categories (alcoholic and non-alcoholic beverages,
2.0 restaurants, and domestic workers’ wages). In addition, the
2017 2018 2019 2020 2021 2022 2023 SARB’s transportation inflation projection for 2H22 likely
Source: StatsSA, J.P. Morgan forecast
needs to be raised (even as April and May benefited from a
temporary levy cut), partly mitigated by a likely lower elec-
Firming signals of a near-term inflation rise and upside risk to tricity tariff hike of 7.5% in July. We therefore expect the
next year’s inflation outlook will now prompt a hawkish shift SARB to revise up its 2022 inflation forecast to around 6.1%-
with a unanimous vote for a 50bp increase, in our view. We 6.2% (from 5.8%).
believe two key developments since the last meeting are a
59
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JPMorgan Chase Bank, N.A., Johannesburg Branch Economic Research
Sthembiso E Nkalanga (27-11) 507-0422 South Africa
sthembiso.nkalanga@jpmorgan.com May 13, 2022
Sonja Keller (27-11) 507-0376
sonja.c.keller@jpmorgan.com
Skewed risks around 2023 inflation should sa in March (-6%m/m in February after +6% in January), sig-
now prompt a further 50bp move in July nificantly beating consensus projections for a contraction.
Wet weather, continued rail & logistics bottlenecks, a delayed
The softening in the currency to USD/ZAR 16.20, from 14.80 return to deep-level mining in January, and the impact of de-
at the time of the March meeting, now probably also supports layed delivery of heavy mining equipment on maintenance
a further 50bp hike in July (previously 25bp) due to the added duration had weighed on output early in the year. The March
inflation risk for 4Q22 and beyond. Notwithstanding remain- outturn reduces the magnitude of the subtraction from 1Q
ing tailwinds from elevated commodity export prices, a string GDP to 0.4%-pt (to from 0.8%-pt previously). Manufacturing
of mining production setbacks, logistics bottlenecks, and re- output also edged up by 0.6%m/m, with a likely 2.2%-pt con-
cent softening in terms-of-trade weigh on the current account tribution to GDP last quarter. On the basis of this outcome,
outlook. In our view, the 1Q22 trade balance surplus probably we raise our sequential GDP estimate to 3.7%q/q, saar (from
softened to 4.2% (from 5.1% in 4Q21) and we now expect a 3.5%) pending trade data next week.
current account surplus of 2% in 2022 (SARB: 3%), down
from 3.7% in 2021. A lowering of the SARB’s current ac-
Data releases and forecasts
count outlook combined with a softer USD/ZAR input as-
sumption (from 15.11 in March) may be a key factor in lifting Week of May 16 – 20
the SARB’s 2023 inflation outlook to 5%-5.2% (from 4.6%; Wed Consumer prices
JPMe: 5.3%) with risks significantly skewed to the upside. In May 18 %oya, except as noted
addition, the 2023 Brent input assumption of US$80p/b prob- 10:00am Jan Feb Mar Apr
ably is lifted to US$88-$90p/b, curbing the disinflationary CPI 5.7 5.7 5.9 6.0
%m/m, sa 0.2 0.6 1.0 0.7
impulse from base effects next year.
Core 3.5 3.5 3.8 3.7
With the output gap probably only marginally changed, such Wed Retail sales
revisions should result in the QPM-modeled repo rate outlook May 18 %oya
1:00pm Dec Jan Feb Mar
marked higher to 5.45% by end-22 (from 5.06% in March;
Real 3.2 7.7 -0.9 __
JPMe: 5.75%) and 6.35% by end-23 (from 6.10%; JPMe: Nominal 6.3 11.9 2.8 __
6.75%) (Figure 4). Note that this remains considerably below
market pricing of South Africa’s rate hiking cycle. However, Thu SARB policy rate announcement
May 19 %
the design of the SARB’s quarterly forecasting framework
We expect the MPC to hike the policy rate by 50bp to
(with mostly conversion to target at the end of the forecast
4.75% (see main text).
horizon) curbs the QPM’s projection of a policy rate in more
than marginally restrictive territory in the outer years of the
forecast horizon.
Review of past week’s data
SARB official reserves
US$ bn, except noted
Figure 4: QPM repo rate projections Feb Mar Apr
%oya Gross reserves 57.7 58.2 __ 60.3
Forecast
6.5 International liquidity 55.5 55.4 __ 54.6
March activity data allow fine-tuning of 1Q Source: StatsSA, National Treasury, J.P. Morgan forecasts
GDP tracking
Hard data releases this week firmed our convictions of still-
solid GDP growth last quarter as we raise our estimate by
0.2%-pt to 3.7%q/q, saar. Mining production rose 1.7%m/m,
60
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J.P. Morgan Securities Australia Limited Economic Research
Ben K Jarman (61-2) 9003-7982 Global Data Watch
ben.k.jarman@jpmorgan.com May 13, 2022
Tom Kennedy (61-2) 9003-7981
tom.kennedy@jpmorgan.com
Australia and New Zealand Figure 1: Australian unemployment and wage growth
WPI, %oya 2000-2014
The coming week’s minutes will offer further insight 4.5
2015 to now
into the RBA’s decision to hike rates in May 4.0
We expect 1Q wages growth to print at 0.8%q/q, lifting 3.5
the annual rate to 2.5% 3.0 4Q21
It’s a busy week ahead in Australia with the RBA minutes The industry/sector composition of wages is likely to be simi-
released on Tuesday, followed by the long-awaited 1Q wage lar to 2H21 when the modest acceleration in quarterly growth
print and labor force survey for April. The RBA minutes will was underpinned by sectors in which private wage negotia-
offer more insight on the Bank’s decision to commence the tions are the most prevalent wage-setting mechanism (for ex-
hiking cycle at its May Board meeting, particularly with re- ample, the professional, technology, and scientific industries).
spect to the magnitude of the move (+25bp) given economist By contrast, industries where wages are tethered to award
expectations were clustered around +15bp or +40bp moves. rates or enterprise bargaining agreements (EBAs) will be
Governor Lowe’s press conference following the announce- slower to respond, and an obvious headwind to near-term
ment repeatedly described the decision as reverting to busi- wages growth. The coming week also brings Australia’s
ness as usual, so we expect the minutes also to reflect this monthly labor force survey. The data have outperformed ex-
sentiment. We anticipate that, like the policy statement, the pectations so far in 2022 with the jobless rate now running at
forward guidance will note that a further rise in interest rates multi-decade lows (current: 4%, Figure 2).
will be required to return inflation to the target band. The
Bank delivered updated economic forecasts in the Statement Figure 2: Australian underemployment and unemployment rates
on Monetary Policy that leave little room for surprise, though % of labor force, both axes
we expect the minutes to reiterate the message that inflation Underemployment rate
8
pressures have intensified and will require a more immediate 13
7 Unemployment rate
monetary policy response. 11
6
9
Big week for the labor data
5 7
We expect the coming week’s 1Q22 wages result in Australia
4 5
to print at 0.8%q/q, one-tenth firmer than the prior quarter’s
outcome, and enough to see the annual rate increase to 3 3
2.5%oya (Figure 1). Market focus on the wage data has argu- 05 07 09 11 13 15 17 19 21 23
Source: ABS, J.P. Morgan
ably diminished in the past month following the RBA’s hawk-
ish pivot and decision to lean more heavily on feedback re-
ceived via its liaison program, rather than wait for confirma- While economic activity remains solid and the main leading
tion in the official data that rising price pressures are also lift- labor indicators are still elevated (for example, new job adver-
ing wages. With regard to the near-term cash rate outlook, we tisements), they are now consistent with the current unem-
view the 1Q data as somewhat asymmetric as a stronger-than- ployment rate. With unemployment now close to our estimate
forecast print (RBA implied quarterly wage growth is 0.7% in of NAIRU, further declines in the jobless rate will be harder-
1H22) would validate the signal from the liaison program, won. Accordingly, we expect the jobless rate to show signs of
while a softer outcome can be downplayed as a timing issue stabilization and oscillate in the high-3s/low-4s in coming
with wages pressure coming later in the year. Still, an annual quarters. In terms of next week’s print, we expect the headline
result of 2.5% could still influence perceptions of whether unemployment rate to hold at 4%, alongside a 30K gain in
policy needs to push well past neutral in the near term. employment and one-tenth increase in the consistently-strong
participation rate to 66.5%.
61
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J.P. Morgan Securities Australia Limited Economic Research
Ben K Jarman (61-2) 9003-7982 Australia and New Zealand
ben.k.jarman@jpmorgan.com May 13, 2022
Tom Kennedy (61-2) 9003-7981
tom.kennedy@jpmorgan.com
Activity and prices still strong is a known dynamic so implications for markets should be
minimal, though it’s worth highlighting this is still a balanc-
Australian retail volumes increased 1.2%q/q in the March
ing act given the pace of near-term reserve drainage remains a
quarter, marginally firmer than the consensus estimate
function of LSAP sales, the Debt Management Office’s
(+1%q/q) but below our forecast of 1.5%q/q. The mix of
(DMO) funding plans, and improvement in the underlying
spending was consistent with expectations and the nominal
budget balance.
monthly data released through 1Q22. All major subgroups
posted strong outcomes, though sales growth at department
stores (+4%q/q) and household goods retailers (+3.4%q/q) Australia
was particularly strong. The retail survey is skewed toward Data releases and forecasts
goods consumption and therefore overlooks spending dynam- Week of May 16 – 20
ics across most service-based sectors. Given we expect ser-
vices to have outperformed early in 2022, we retain the view Wed Private wages ex. overtime
May 18 Jun Sep Dec Mar
that household consumption will outperform the retail-
11:30am %q/q 0.6 0.7 0.7 0.8
specific data.
The NAB business survey for April was also released this Thu Labor force survey
week. The headline measures sent mixed signals as business May 19 Jan Feb Mar Apr
confidence fell 6pts to +10, while firms’ perceptions of oper- 11:30am Unemployment rate (%) 4.3 4.2 4.0 4.0
ating conditions climbed 5pts to +15. The survey’s nominal Employment (ch. 000s) 12.9 77.4 17.9 30.0
indicators were mixed with the price of final products (the Participation rate (%) 66.2 66.4 66.4 66.5
most relevant component for CPI) falling to 1.7%q/q from
2.4%q/q, while firms’ reported labor/purchase costs increased
and remain very high by historical standards. The read- Review of prior week’s data
through from these survey-based measures to the official CPI NAB business confidence (10 May)
data is somewhat murky, though in general we view the April Feb Mar Apr
print as consistent with still-elevated inflationary pressures Index 14.0 ___ 16.0 ___ 10.0
and expect annual headline and core inflation to accelerate in
2Q.
Retail sales volumes (10 May)
Sep Dec Mar
NZ Budget to reveal smaller deficits %q/q 1.6 7.9 1.2
New Zealand’s Budget for 2022 is released in the coming
week and the tracking data suggest the deficit will print near
NZ$7 billion, roughly NZ$5 billion narrower than the forecast New Zealand
from the midyear update delivered just six months ago. The
improvement in the budget bottom line is directly related to Data releases and forecasts
revenues, which have outperformed expectations by 5% on Week of May 16 – 20
the back of a spike in corporate taxation. While the fiscal ac- Fri Trade balance
counts will show meaningful fiscal repair, the government has May 20 Jan Feb Mar Apr
already indicated that spending plans are unlikely to be al- 8:45am NZ$bn -1.1 -0.7 -0.4
tered, meaning the associated fiscal impulse will be relatively
minor.
Review of prior week’s data
At the half year update the NZ government materially lowered RBNZ 2Y inflation expectations
its bond issuance forecasts by NZ$10bn for FY2021 and Dec Mar Jun
NZ$7bn in the three subsequent years for a cumulative % 3.0 3.3 3.3
NZ$31bn reduction. At face value the improvement since late
last year suggest new issuance numbers can be trimmed fur-
Source: ABS, Stats NZ, J.P. Morgan forecast
ther, however we expect only modest changes (if any) given
the government will need to fund asset purchases from the
RBNZ as the central bank unwinds its balance sheet. The
RBNZ has sketched out its plans for asset sales, which will
occur gradually at a pace of NZ$5 billion per fiscal year. This
62
This document is being provided for the exclusive use of Kurt Zhang at Huatai Financial Holdings (Hong Kong) Limited.
JPMorgan Chase Bank, N.A., Hong Kong Economic Research
Haibin Zhu (852) 2800-7039 Tingting Ge (852) 2800-0143 Global Data Watch
haibin.zhu@jpmorgan.com tingting.ge@jpmorgan.com May 13, 2022
Grace Ng (852) 2800-7002
grace.h.ng@jpmorgan.com
Figure 1: China merchandise trade growth The 1%-pt RRR cut for FX deposits seems insufficient to alter
%oya CNY/USD weakness, and we think the primary target of the
50 Exports PBOC is to maintain currency flexibility and stability, which
Imports
40 is also in line with the US-China phase 1 trade deal, and avoid
30 one-sided depreciation expectations. Our FX strategist has
20 lifted the 2Q CNY/USD target to 6.7 (from 6.50) and the
year-end target to 6.80 (from 6.60) and we see the risk of
10
CNY weakness overshooting in the near term. If more macro
0
weakness fuels market expectation of further CNY deprecia-
-10 tion and CNY/USD is chased weaker, we think the PBOC
-20 will roll out more measures to help the market anchor curren-
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Source: China Customs, J.P. Morgan
cy expectations. Available macro-prudential policy instru-
ments include further FX deposit RRR cuts, increasing the
63
This document is being provided for the exclusive use of Kurt Zhang at Huatai Financial Holdings (Hong Kong) Limited.
JPMorgan Chase Bank, N.A., Hong Kong Economic Research
Haibin Zhu (852) 2800-7039 Tingting Ge (852) 2800-0143 Greater China
haibin.zhu@jpmorgan.com tingting.ge@jpmorgan.com May 13, 2022
Grace Ng (852) 2800-7002
grace.h.ng@jpmorgan.com
risk reserve ratio for FX forward transactions, reintroducing resists cutting the policy rate, there could still be a 10bp cut in
the counter-cyclical factor, and window guidance to encour- the LPR rate (the most relevant benchmark for banks’ lending
age more USD selling and restrict USD buying. rates) in May. If the PBOC were to resist lowering the MLF
in May, we believe the chances of MLF cuts for the rest of the
CPI and PPI inflation picked up sequentially year will be fairly low, especially considering that headline
CPI will likely trend up to average 2.9%oya in 2H22, as men-
Both CPI and PPI inflation came in above expectations in
tioned above.
April. Headline CPI grew 2.1%oya on a 0.9%m/m, sa rise
(Figure 3). Both food and energy prices picked up while core
CPI inflation stayed modest. Food prices jumped 3.1%m/m, Credit growth slowed notably on weak
sa on rising logistics costs amid the Omicron disruptions and credit demand and Omicron disruption
pork prices have started to recover on a modest 1.5%m/m, nsa April credit data disappointed the market as TSF growth
gain. Energy prices picked up further as vehicle fuel prices slowed by 0.4%-pt to 10.2%oya (Figure 4), and bank loan
rose 2.7%m/m, nsa. The core CPI edged up 0.1%m/m, sa as growth eased to 10.9%oya from 11.4% in March. The weak
prices for a range of major non-food, non-energy CPI items, credit report was driven by weak credit demand rather than
including clothing, medicine and medical care, and recreation, limited credit supply. This can be observed via the discrepan-
stayed flat in %m/m sa terms. While the annual PPI inflation cy between the pickup in M2 growth (from 9.7%oya to
rate eased to 8.0%oya from 8.3% in March, in sequential 10.5%oya) and the slowdown in loan growth (from 11.4%oya
terms, PPI rose 0.9%m/m, sa, attributable to elevated global to 10.9%oya).
commodity prices, such as oil, coal, and industrial metals.
Various credit components eased in April. Amid significant
Figure 3: China headline CPI and PPI weakness in property market transactions, using policy, total
%3m/3m saar, both scales loans to the households (heavily driven by mortgage loans)
12 PPI (NBS) 18 contracted 217 billion yuan in April. Medium- to long-term
Headline CPI loans to the corporate sector slowed significantly, suggesting
9 12
soft credit demand for corporate sector financing and invest-
6 6 ment. The PBOC also mentioned that rising costs of raw ma-
terials and input shortages have worsened the operating condi-
3 0
tions for the corporate sector, especially SMEs, leading to
0 -6 notable slowing in effective financing needs. Meanwhile,
government bond issuance moderated and corporate bond
-3 -12
issuance remained steady. Short-term bill financing for corpo-
10 12 14 16 18 20 22
Source: NBS, J.P. Morgan rates picked up, a typical phenomenon when the credit policy
guideline is relaxed but credit demand remains relatively soft.
While the Omicron-related travel restrictions may lead to lo-
gistics bottlenecks and longer delivery times, posing upward Figure 4: China TSF growth and credit impulse
cost pressure, the experience of the past two years suggests % JPM
forecast
core CPI generally tends to soften during periods when 40
COVID-19 cases spike and related lockdowns/mobility re- TSF growth
30
striction measures tighten, as consumer spending, transporta-
tion, and general service activity slow in the near term. In 20
addition, concerns about job security and the income outlook
10
amid recurring virus spikes could weigh on household senti-
ment and consumer spending, restraining pricing power for 0
TSF growth minus nominal GDP growth
consumer goods and services. Overall, we expect China’s CPI -10
inflation to stay at around 2.3%oya in 2Q22, before trending 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22
to average around 2.9% in 2H22. For full-year 2022, we ex- Source: PBOC; J.P. Morgan
pect CPI inflation to average at about 2.3%y/y.
In our view, the disappointing April credit report further high-
On the policy side, our baseline scenario looks for a 10bp cut lights the near-term weakness in the economy amid Omicron
in the MLF policy rate in May, though this is not a high- disruption, leading to further weakness in domestic demand
conviction call. In the 1Q monetary policy report, the PBOC and hence soft credit demand. For the macro picture, the
noted the importance of a market-oriented deposit rate mech- Omicron wave and zero-COVID policy remain the most
anism, and noted that banks’ weighted-average deposit rates prominent near-term concerns for the economy. On monetary
fell 10bp in the last week of April. Hence, even if the PBOC policy, we expect a 10bp rate cut in both MLF and LPR next
64
This document is being provided for the exclusive use of Kurt Zhang at Huatai Financial Holdings (Hong Kong) Limited.
JPMorgan Chase Bank, N.A., Hong Kong Economic Research
Haibin Zhu (852) 2800-7039 Tingting Ge (852) 2800-0143 Global Data Watch
haibin.zhu@jpmorgan.com tingting.ge@jpmorgan.com May 13, 2022
Grace Ng (852) 2800-7002
grace.h.ng@jpmorgan.com
week, but it has become a low-conviction call. Amid concerns March, with a strong sequential growth trend at 65.0%3m/3m,
of US-China monetary policy divergence and the latest uptick saar (Figure 5). Non-tech exports seem to have picked up
in China’s headline CPI, the PBOC may choose to lower some momentum, growing a notable 6.8%m/m, sa in April
market rates (LPR) without cutting the policy rates (MLF and and boosting sequential trend growth to 22.7%3m/3m, saar. In
7-day reverse repo rate) next week. In the bigger picture, the particular, the machinery exports grew 26.1%3m/3m, saar,
room for further rate cuts is very limited. hinting at solid momentum in the global capex growth trend.
65
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JPMorgan Chase Bank, N.A., Hong Kong Economic Research
Haibin Zhu (852) 2800-7039 Tingting Ge (852) 2800-0143 Greater China
haibin.zhu@jpmorgan.com tingting.ge@jpmorgan.com May 13, 2022
Grace Ng (852) 2800-7002
grace.h.ng@jpmorgan.com
China:
Data releases and forecasts Hong Kong SAR:
Week of May 16 – 20 Data releases and forecasts
Mon Fixed investment Week of May 16 – 20
May 16 % change
10:00am Jan Feb Mar Apr Thu Labor market survey
%oya 12.2 12.2 7.1 3.6 May 19 Sa, 3mma
%oya, ytd 12.2 12.2 9.3 7.3 4:30pm Jan Feb Mar Apr
Unemployment rate 3.9 4.5 5.0 5.1
Mon Industrial production
May 16 %
10:00am Jan Feb Mar Apr Review of past week’s data
%oya 7.5 7.5 5.0 0.4 Real GDP (13 May)
%m/m, sa 0.9 0.6 -1.1 -4.0 % change
21Q3 21Q4 22Q1
Mon Retail sales %oya 5.4 5.4 4.7 4.7 -4.0
May 16 % change %q/q, saar 2.7 2.8 0.0 0.0 -11.1 -11.4
10:00am Jan Feb Mar Apr
%oya 6.7 6.7 -3.5 -5.4
%m/m, sa 0.6 0.5 -1.2 -9.0 Taiwan:
Data releases and forecasts
Review of past week’s data Week of May 16 – 20
FX reserves (7 May) Fri Export orders
US$tn
May 20 % change
Feb Mar Apr
4:00pm Jan Feb Mar Apr
Foreign reserves 3.21 0.9 3.19 1.5 3.12
%oya 11.7 21.1 16.8 8.3
%m/m, sa 0.3 14.4 -7.7 -1.8
Merchandise trade (9 May)
US$bn
Feb Mar Apr Review of past week’s data
Balance 30.5 30.5 47.4 47.4 59.9 51.1
Merchandise trade (9 May)
Exports 217.5 217.5 276.1 276.1 270.1 273.6
US$bn
%oya 6.3 6.3 14.7 14.7 2.5 3.9
Feb Mar Apr
Imports 187.0 187.0 228.7 228.7 210.2 222.5
Balance 5.8 5.8 4.7 4.7 4.9
%oya 10.5 10.5 -0.1 -0.1 -5.6 0.0
Exports 37.5 37.5 43.5 43.5 38.9 41.5
%oya 34.8 34.8 21.3 21.3 11.6 18.8
Consumer prices (11 May)
Imports 31.6 31.6 38.8 38.8 34.0 36.6
% change
%oya 35.3 35.3 20.3 20.3 18.0 26.7
Feb Mar Apr
%oya 0.9 0.9 1.5 1.5 1.7 2.1
%m/m sa 0.2 0.2 0.7 0.7 0.4 0.9
Source: NBS, China Customs, Hong Kong Census and Statistics Department, Taiwan Ministry of
Producer prices (NBS) (11 May)
Economic Affairs, DGBAS, MoF, J.P. Morgan forecasts
% change
Feb Mar Apr
%oya 8.8 8.8 8.3 8.3 7.0 8.0
The long-form nomenclature for references to China; Hong Kong; and Taiwan within this research
%m/m, sa 1.0 1.0 0.8 0.8 0.3 0.9
material is Mainland China; Hong Kong SAR (China); and Taiwan (China).
66
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JPMorgan Chase Bank, N.A., Seoul Branch Economic Research
Seok Gil Park (82-2) 758-5509 Global Data Watch
seok.g.park@jpmchase.com May 13, 2022
Jisun Yang (822) 758-5512
jisun.yang@jpmorgan.com
67
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JPMorgan Chase Bank, N.A., Seoul Branch Economic Research
Seok Gil Park (82-2) 758-5509 Korea
seok.g.park@jpmchase.com May 13, 2022
Jisun Yang (822) 758-5512
jisun.yang@jpmorgan.com
68
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JPMorgan Chase Bank, N.A., Singapore Branch Economic Research
Jin Tik Ngai, CFA (65) 6807 5556 Global Data Watch
jintik.ngai@jpmorgan.com May 13, 2022
69
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JPMorgan Chase Bank, N.A., Singapore Branch Economic Research
Jin Tik Ngai, CFA (65) 6807 5556 ASEAN
jintik.ngai@jpmorgan.com May 13, 2022
Figure 3: Thailand export growth¹ Figure 5: World food price index vs. Thailand farm income
%oya %oya
Total exports Exports ex. gold 19.6
20
45
18 World food price index¹
15.9
16
20
14 12.3
12
-5
10 8.9
7.9
8 6.8 Thailand farm income
-30
6 2015 2016 2017 2018 2019 2020 2021 2022
Jan 22 Feb 22 Mar 22 Source: FAO, CEIC, J.P. Morgan 1. World food price, containing grains and seedoil, is a proxy
Source: CEIC, J.P. Morgan estimates 1. Customs trade data of farmers' input costs
Consumer to do the heavy lifting Inflation stalls in April but has not peaked
External sector weakness, at least through 2Q22, means that April inflation moderated to 4.7%oya, coming in below ex-
the onus is on private consumption to support growth. In this pectations, driven mostly by flat transport and energy prices.
regard, mobility and consumer spending should continue to However, we expect the inflation profile to increase, peaking
get a lift from the transition toward an endemic equilibrium, around 6%-8% in 3Q22 (Figure 6). Fuel prices should be re-
but declining consumer confidence and a choppy YTD recov- set higher as the diesel subsidy rationalization kicks in effec-
ery profile (Figure 4) suggest that there are other major drags tive May 1. Electricity tariffs are also scheduled to increase by
in play. In our view, food and fuel price inflation since 4Q21 7% in May and 11% in September. Persistent supply shortag-
have delivered a significant shock to real incomes. This situa- es from the Ukraine crisis and Indonesia’s palm oil export ban
tion is particularly acute for farmers, whose margins are being also mean more upside to global food prices. This could bring
eroded by intense input cost pressures (e.g., animal feed, ferti- another round of re-pricing in the prepared food/F&B seg-
lizer) that have far exceeded output prices (Figure 5). The key ment later in the next one to two quarters. Given rising odds
catalyst for private consumption is still tourist receipts, given of second-round effects, we have recently revised up our
that tourism-related services employ roughly 20% of the headline CPI forecast from 4.8% to 6.0% and core CPI fore-
workforce. Border reopening, alongside the removal of key cast from 2.1% to 2.5% in 2022.
entry requirements, should lead to further improvement but on
an absolute basis, we are projecting only 5.6 million arrivals Figure 6: Thailand headline vs. core CPI
or US$6.7 billion in net travel receipts in 2022, 15% of pre- %oya oya%
Headline CPI Core CPI
pandemic levels. 10 4.0
8
Figure 4: Consumer confidence vs. private consumption 3.0
6
Index Private consumption %oya 2.0
Consumer confidence index 4
100 indicator 20 2 1.0
0
10 0.0
80 -2
0 -4 -1.0
2018 2019 2020 2021 2022
60 Source: CEIC, J.P. Morgan forecast in shaded area
-10
70
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JPMorgan Chase Bank, N.A., Singapore Branch Economic Research
Jin Tik Ngai, CFA (65) 6807 5556 Global Data Watch
jintik.ngai@jpmorgan.com May 13, 2022
of the pandemic could mean that the BoT is willing to look %oya 3.5 5.0 4.1 5.0
through higher inflation, even in the core component. In an %q/q, saar -3.3 14.0 4.1 3.5
open letter to the Minister of Finance issued in early April, the The central theme of the 1Q22 GDP print is the continued re-
central bank stated that inflationary pressures are cost-push covery in private consumption as public spending is gradually
withdrawn. This lays the groundwork for the liberalization in
and that headline CPI is expected to return to the 1%-3% tar- energy prices, which should lead to a rise in core inflation in
get range in early 2023. As such, the BoT can still afford to May and prompt BI to initiate rate liftoff in June.
maintain a pro-growth stance to ensure a more robust post-
pandemic recovery. We continue to expect rate normalization Consumer prices (May 9)
to commence in 1Q23, followed by 25bp hikes in 2Q23 and % change
3Q23 with the terminal policy rate ending at 1.25%. As men- Feb Mar Apr
tioned previously, we remain vigilant of signposts that could All items, %oya 2.1 2.6 3.0 3.5
warrant an earlier rate liftoff, namely broadening, demand- %m/m, sa 0.7 0.0 0.5 0.7
pull price pressures beyond food and fuel, as well as a materi- Headline CPI came in above expectations in April. Core CPI al-
al deterioration in excess liquidity resulting from accelerated so rose 0.3%m/m, sa and 2.6%oya. Price gains were driven by
the adjustment in Pertamax motor gasoline prices and volatile
deposit outflows as negative interest rate differentials widen. food items, especially cooking oil prices. We expect CPI to rise
materially in coming months on Lebaran seasonality and the
Figure 7: Thailand augmented Taylor Rule (TR) expected hike in Pertalite motor gasoline prices, which will
Policy rate, % likely prompt BI to initiate rate liftoff in June.
4.0
3.0 Malaysia
TR-implied
2.0 Data releases and forecasts
Week of May 16 – 20
1.0
Actual
Thu Merchandise trade
0.0 May 19 US$ bn, nsa
-1.0 12:00pm Jan Feb Mar Apr
12 14 16 18 20 22 Trade balance 4.4 4.7 6.4 4.0
Source: J.P. Morgan estimates Exports 26.5 24.4 31.3 26.4
%oya 19.4 12.8 22.7 2.9
Imports 22.1 19.7 25.0 22.4
ASEAN %oya 22.1 14.3 27.1 8,1
Indonesia
Review of past week’s data
Data releases and forecasts
BNM monetary policy meeting (May 11)
Week of May 16 – 20 % pa
Tue Merchandise trade Jan Mar May
May 17 US$ bn, nsa O/N policy rate 1.75 1.75 1.75 2.00
11:00 am Jan Feb Mar Apr BNM hiked the OPR by 25bp against JPM and consensus ex-
Trade balance 1.0 3.8 4.5 3.8 pectations of a hold, attributing the decision to stronger domes-
Exports, %oya 25.4 34.2 44.4 31.1 tic growth prospects as economic reopening gathers pace. Given
Imports, %oya 36.6 25.4 30.9 26.3 that BNM’s reaction function is more sensitive to growth than
inflation, there is risk of faster policy normalization. For now,
the central bank’s guidance for “measured and gradual” adjust-
Fri Balance of payments ments implies further 25bp rate hikes in 3Q22 and 4Q22.
May 20 US$ bn
2Q21 3Q21 4Q21 1Q22 Real GDP (May 13)
Current account -2.0 4.5 1.3 4.3 % change
Capital account 1.6 6.7 -2.4 -5.0 3Q21 4Q21 1Q22
Overall balance -0.4 10.7 -0.8 -0.8 %oya -4.5 3.6 3.1 5.0
%q/q, saar -13.5 28.9 9.8 16.4
Review of past week’s data 1Q22 GDP beat expectations, driven by a strong rebound in
private consumption as the economy reopens and households
Real GDP (May 9) tap into EPF withdrawal facilities and stimulus paychecks.
% change Strong domestic growth momentum set up for 50bp of rate
3Q21 4Q21 1Q22 hikes in 2H22 and another 50bp in 1H23.
71
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JPMorgan Chase Bank, N.A., Singapore Branch Economic Research
Jin Tik Ngai, CFA (65) 6807 5556 ASEAN
jintik.ngai@jpmorgan.com May 13, 2022
Philippines Vietnam
Data releases and forecasts Data releases and forecasts
Week of May 16 – 20 Week of May 16 – 20
Thu BSP monetary policy meeting No data releases.
May 19 % pa
Dec Feb Mar May Review of past week’s data
Reverse repo rate 2.00 2.00 2.00 2.25
No data released.
Review of past week’s data Source: Central Bureau of Statistics, Indonesia; Department of Statistics, Malaysia Coordination
Board and National Statistics Office, Philippines, Singapore Statistics Department, Office for
Real GDP (May 12) Industrial Economics, Thailand; Bank of Thailand; General Statistics Office of Vietnam; J.P.
% change Morgan forecasts
3Q21 4Q21 1Q22
%oya 6.9 7.7 6.8 8.3
%q/q, saar 12.9 13.0 6.5 7.6
1Q22 real GDP beat consensus expectations, driven by a robust
recovery in domestic demand as mobility restrictions are lifted.
The strong growth momentum, together with the slew of above-
target CPI prints in recent months, has led us to expect rate lift-
off to begin in May, with an additional 25bp hike in June and
50bp hikes in 2H22, bringing the policy rate to 3.0% by the end
of the year.
Singapore
Data releases and forecasts
Week of May 16 – 20
Tue Merchandise trade
May 17 US$ bn, nsa
8:30am Jan Feb Mar Apr
Trade balance 3.6 5.2 3.7 1.8
Exports 40.6 38.6 46.5 45.8
NODX 13.1 11.5 14.1 13.2
%m/m, sa, US$ terms 5.9 -2.6 -3.2 0.3
%oya, US$ terms 15.4 7.9 6.4 10.0
72
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JPMorgan Chase Bank, N.A., Mumbai Branch Economic Research
Sajjid Z Chinoy (91-22) 6157-3386 Global Data Watch
sajjid.z.chinoy@jpmorgan.com May 13, 2022
Toshi Jain (91-22) 6157-3387
toshi.jain@jpmorgan.com
4
Inflation remains on an uptrend with April CPI increasing 3.5 3
sequentially by 1.0% for second successive month. Core infla- Jan 20 Jul 20 Jan 21 Jul 21 Jan 22
tion was also strong growing sequentially by 0.6% in April. Source: MOSPI
All this contributed to a large upward surprise with headline
inflation printing at 7.8%oya in April accelerating from 7.0% IP strong in March
in March. This week’s print reinforces our call of the RBI
delivering a 50bp hike in the June policy. On the activity The firming of core can likely be attributed to unrelenting cost
front, industrial production has been recovering at a fast clip pressures intersecting with an economy that was recovering
in the last few months and continued that streak in March, before the negative terms of trade shock from higher global
growing sequentially by 2.7%m/m, sa. That said, we expect commodity prices. The services economy has continued to
the adverse terms of trade (ToT) shock from rising oil and recover in recent months post-Omicron—reflected in the
commodity prices to pressure growth in coming quarters. strength of the services PMIs. But what has been a pleasant
surprise is the second wind that industrial production seems to
April CPI surprises to the upside have acquired in recent months. The March IP released this
India’s headline CPI prices surged 1% sequentially for a sec- week surged another 2.7%m/m, sa on the back of the strong
ond successive month, underpinning April CPI to print at an increases of 1.4% in February and 2.1% in January (Figure 3).
eight-year high of 7.8%oya, discernably above market expec- On a year-on-year basis IP therefore printed at 1.9% in
tations (J.P. Morgan and consensus: 7.4%). This reinforces March, much above expectations (J.P. Morgan: 1.0% oya;
our call of the RBI delivering a 50bp hike in June policy, on consensus: 1.3%oya) and the increases were broad-based.
the back of last week’s 40bp inter-meeting hike, which re- That said, the adverse terms of trade (ToT) shock from rising
vealed an appropriately-hard pivot by the RBI toward infla- oil and commodity prices is expected to pressure growth in
tion management, against growing risks of entrenched infla- coming quarters, and to show up most visibly in margin and
tionary pressures and expectations. Proof of this was visible in earnings squeezes for firms.
the continued firming of underlying inflation. Core-core pric- Figure 3: Industrial production
es (standard core adjusted for diesel and petrol) rose another
% m/m,sa
0.6%m/m, sa in April on the back of the 0.7% increase in
3
March. Therefore, even as core-core inflation rose to a series-
2
high of 6.5% on a year-on-year basis, the underlying momen-
tum is even higher with the 3m/3m, saar rising to almost 7.0% 1
in April. 0
-1
Figure 1: Headline CPI inflation -2
% oya -3
8 Aug 21 Sep 21 Oct 21 Nov 21 Dec 21 Jan 22 Feb 22 Mar 22
RBI inflation target
Source: MoSPI
upper band
6
4
Meanwhile, within the CPI details, both food and fuel prices
contributed to the upward surprise rising by 1.1% and
RBI inflation target
2 4.0%m/m, sa, respectively. Within the food basket, both glob-
al (oil seeds and wheat) and domestic (fruits) factors drove the
0 increases. All told, food inflation firmed further from
16 17 18 19 20 21 22 7.5%oya in March to 8.1% in April (Figure 4). Meanwhile,
Source: MoSPI price hikes in LPG, kerosene, and electricity underpinned the
73
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JPMorgan Chase Bank, N.A., Mumbai Branch Economic Research
Sajjid Z Chinoy (91-22) 6157-3386 India
sajjid.z.chinoy@jpmorgan.com May 13, 2022
Toshi Jain (91-22) 6157-3387
toshi.jain@jpmorgan.com
sharp increase in fuel prices. Separately, petrol and diesel— August policy onwards, as we had laid out after last week’s
though not technically part of the fuel basket—firmed another inter-meeting hike.
9%-10% sequentially in April.
Data releases and forecasts
Figure 4: Food inflation
Week of May 16 – 20
% , both axes
12 % 3m/3m, saar No data releases.
19
9 % oya 14
Review of past week’s data
6 9 Consumer prices (May 12)
3 4 % oya
Jan Feb Mar Apr
0 -1
Overall 6.0 6.1 7.0 7.8
-3 -6 Core-core 5.6 5.6 6.2 6.5
17 18 19 20 21 22
Source: MOSPI Industrial production (May 12)
74
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JPMorgan Chase Bank NA Economic Research
Daniel Silver (1-212) 622-6039 Global Data Watch
daniel.a.silver@jpmorgan.com May 13, 2022
US economic calendar
Monday Tuesday Wednesday Thursday Friday
16 May 17 May 18 May 19 May 20 May
Empire State survey (8:30am) Retail sales (8:30am) Housing starts (8:30am) Initial claims (8:30am) QSS (10:00am)
May 12.0 Apr 1.5% Apr 1,705,000 w/e May 14 195,000 1Q advance
TIC data (4:00pm) Ex. autos 0.8% Permits 1,825,000 Philadelphia Fed manufacturing
Mar Business leaders survey (8:30am)
(8:30am) Auction 20-year bond $17bn May 9.0
New York Fed President Williams May Existing home sales (10:00am)
speaks (8:55am) Industrial production (9:15am) Philadelphia Fed President Harker Apr 5.65mn
Apr 0.5% speaks (4:00pm) Leading indicators (10:00am)
Manufacturing 0.4% Apr
Capacity utilization 78.6%
Business inventories (10:00am) Announce 2-year FRN (r) $22bn
Mar 1.9% Announce 2-year note $47bn
NAHB survey (10:00am) Announce 5-year note $48bn
Announce 7-year note $42bn
May 76 Auction 10-year TIPS (r) $14bn
Source: Private and public agencies and J.P. Morgan. Further details available upon request.
75
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J.P. Morgan Securities plc Economic Research
Greg Fuzesi (44-20) 7134-8310 Global Data Watch
greg.x.fuzesi@jpmorgan.com May 13, 2022
Highlighted data are scheduled for release on or after the date shown. Times shown are local. Source: Public and private agencies and J.P. Morgan. Further
76
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JPMorgan Securities Japan Co., Ltd. Economic Research
Hiroshi Ugai (81-3) 6736-1173 Global Data Watch
May 13, 2022
Ayako Fujita (81-3) 6736-1172
Auction 10-year note Auction 5-year note Auction 1-year note Auction 3--month bill
Auction 20-year note
During the week: Nationwide department store sales Apr (16-23 May)
Times shown are local. Source: Private and public agencies and J.P. Morgan. Further details available upon request.
77
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JPMorgan Chase Bank NA Economic Research
Silvana Dimino (1-212) 834-5684 Global Data Watch
Gopal Kumar (91-22) 6157-3080 May 13, 2022
Source: Private and public agencies and J.P. Morgan. Further details available upon request.
78
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Banco J.P.Morgan, S.A., Institución de Banca Múltiple, J.P.Morgan Economic Research
Grupo Financiero Global Data Watch
Steven Palacio (52 55) 5382-9651 May 13, 2022
steven.palacio@jpmorgan.com
During the week: Argentina: Government Tax Revenue May Colombia: CPI Apr Core CPI Apr
During the week: Brazil: Vehicle Sales Anfavea May (6-7 Jun)
Times shown are local. Source: Private and public agencies and J.P. Morgan. Further details available upon request.
79
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J.P. Morgan Securities plc Economic Research
Allan Monks (44-20) 7134-8309 Global Data Watch
Morten Lund May 13, 2022
During the week: BoE/NOP Inflation attitudes survey Jun (5-15 Jun)
Times shown are local. Source: Private and public agencies and J.P. Morgan. Further details upon request.
80
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J.P. Morgan Securities plc Economic Research
Jessica Murray (44-20) 7742 6325 Global Data Watch
jessica.x.murray@jpmorgan.com May 13, 2022
During the week: South Africa: Quarterly Labour Force Survey 1Q (6-30 Jun) Angola: CPI May (11-25 Jun) Angola: FX reserves May (11-25 Jun)
Times shown are local. Source: Private and public agencies and J.P. Morgan. Further details available upon request.
81
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JPMorgan Chase Bank, N.A., Hong Kong Economic Research
Tingting Ge (852) 2800-0143 Global Data Watch
tingting.ge@jpmorgan.com May 13, 2022
During the week: Vietnam: CPI May (25-31 May) Vietnam: Exports May (25-31 May) Vietnam: Industrial output May (25-31 May) Thailand: Mfg. Production Apr (26-
30 May)
Times shown are local. Source: Private and public agencies and J.P. Morgan. Further details available upon request.
82
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JPMorgan Chase Bank NA Economic Research
Olya Borichevska (1-212) 834-5398 Global Data Watch
olya.e.borichevska@jpmorgan.com May 13, 2022
Bennett Parrish
bennett.parrish@jpmchase.com
Source: Private and public agencies and J.P. Morgan. Further details available upon request.
83
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JPMorgan Chase Bank NA Economic Research
Olya Borichevska (1-212) 834-5398 Global Data Diary
olya.e.borichevska@jpmorgan.com May 13, 2022
Bennett Parrish
bennett.parrish@jpmchase.com
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Bennett Parrish
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This document is being provided for the exclusive use of Kurt Zhang at Huatai Financial Holdings (Hong Kong) Limited.