ShareKUWAIT: Consumer confidence in the United States fell sharply in April hitting its lowest level since July 2022. The Conference Board’s consumer confidence index came in at 97, significantly below forecasts of a 104 print and lower than March’s 103.1 figure. According to Dana Peterson, chief economist at the Conference Board, “Consumers became less positive about the current labor market situation, and more concerned about future business conditions, job availability, and income.” She added that “According to April’s write-in responses, elevated price levels, especially for food and gas, dominated consumer’s concerns, with politics and global conflicts as distant runners-up.”
Manufacturing activity in the US contracted in April, with the ISM manufacturing index dropping to 49.2 from 50.3 in March, and below expectations of 50.0. The employment index and the prices paid index both showed improvements from the previous month, with the figures at 49.1 and 60.9 respectively, up from 51.4 and 55.8. Meanwhile, economic activity in the services sector contracted for the first time since December 2022, coming in at 49.4 from 51.4 previously. According to the survey, “The decline in the composite index in April is a result of lower business activity, slower new orders growth, faster supplier deliveries and the continued contraction in employment” indicating that higher interest rates that have affected the manufacturing sector is starting to show its consequence on the services side as well.
Job openings fall to three - year low
Job openings in the US fell to the lowest level in three years, coming in at 8.49 million openings versus expectations of 8.69 million and a previous reading of 8.81 million openings. In terms of sectors, construction openings fell by 182k while finance and insurance fell by 158k. Overall, the fall in job openings suggests a weakening labor market although it remains historically tight.
In the latest FOMC meeting, the Federal Reserve have decided to keep interest rates unchanged at 5.25 percent-5.50 percent, while indicating that the committee will be looking at upcoming data to assess their next moves with regards to interest rate changes, emphasizing that inflation was not showing further progress in recent months. Following the statement, Fed Chair Jerome Powell delivered a speech, where he indicated that a hike in interest rates is highly unlikely, meanwhile Powell was cautious about assessing when it would be appropriate to start cutting interest rates. The dovish tone by the Fed was accompanied by a drop in the US dollar.
Non-farm employment slows
The latest NFP report shows 175k jobs added last month versus expectations of 240k jobs to be added and February’s downward revision of 236k jobs. The unemployment rate ticked up to 3.9 percent while labor force participation rate remained unchanged at 62.7 percent indicating a slowing down of hirings rather than an increase in the amount of people actively seeking employment. Average hourly earnings rose 0.2 percent over the month and 3.9 percent annually, missing expectations of a 0.3 percent and 4 percent increase respectively. The report indicates a slowdown in what has been a historically stubborn and tight labor market, however not enough yet to suggest a dramatic shift in Fed policy for cuts. Markets are pricing in two rate cuts by year-end, starting in September and another one in December.
Headline inflation in the eurozone remained steady at 2.4 percent while core inflation, which excludes volatile energy and food prices, fell slightly to 2.7 percent, although it came in above the expected 2.6 percent figure. Headline CPI in the bloc’s largest economy, Germany, held steady at 2.4 percent for the first time in four months increasing concerns about a potential spark in inflation.
Meanwhile, the eurozone economy grew 0.3 percent in the first quarter, exceeding forecasts. However, this might be partly due to data revisions and needs to be confirmed in future reports. There are significant differences in growth rates between countries, with Spain performing the best and Germany and France lagging behind. Positive surprises came from external demand, likely due to weak import demand in some countries. Inventory corrections seem to have continued in some areas, negatively impacting domestic demand. Household consumption showed positive signs in Spain and France. The EUR/USD currency pair closed the week at 1.0733.
Asia-Pacific
There are positive signs for Chinese manufacturing with the PMI remaining in expansion territory at 50.5, though down slightly from March. This indicates continuity in recovery for China’s economy in Q2 2024. Meanwhile, the demand for new orders and new export orders remains positive, suggesting that demand increase is likely to hold. Production rose to a 13-month high, and purchasing prices reached a 7-month high, demonstrating strong production activity and rising input costs. As for manufacturing employment, it remains in contraction for the 14th month due to a mismatch between labor demand and supply. The Caixin Manufacturing PMI also increased unexpectedly from 51.1 to 51.4 in April, with new orders expanding at the fastest pace in over a year. The non-manufacturing PMI on the other hand dropped more than expected to 51.2, suggesting issues with the services sector. The USD/CNY currency pair closed the week at 7.2418.
Yen surges
Following last week’s Bank of Japan (BoJ) meeting that saw the central bank maintain interest rates at current levels and the Yen slip to a 34 year low, reaching 160.03 at one point, USD/JPY rallied after a suspected intervention by the BoJ. The currency surged more than 2 percent on Wednesday’s trading session, with Bank of America research estimating that the cost of a potential first intervention was around $32.7 billion to $39.2 billion and the second intervention being smaller. While the central bank did not confirm any intervention, traders noticed that the 160 level was facing stiff resistance. The USD/JPY currency pair closed the week at 153.29.
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