Take Two: US inflation eases; Eurozone 2025 GDP forecast nudged down
- 20 May 2024 (3 min read)
What do you need to know?
US annual inflation edged back to 3.4% in April from 3.5% in March, prompting US stocks to hit a fresh high. Core inflation, which excludes food and energy prices, slowed to 3.6% from 3.8%, its lowest since April 2021. Both the S&P 500 and Nasdaq indices hit new highs following the news while the Dow Jones crossed the 40,000 mark for the first time during intraday trading on Thursday, as the softer inflation data raised hopes that the Federal Reserve (Fed) would begin cutting interest rates later in the year. We continue to expect the Fed to ease rates in September and December.
Around the world
The European Commission (EC) now expects Eurozone inflation to fall faster than previously, while 2025’s economic growth rate is also likely to be lower than it previously anticipated. It forecasts that inflation will fall from 5.4% in 2023 to 2.5% this year – down from February’s 2.7% forecast – and to 2.1% in 2025, compared to its earlier estimate of 2.2%. The EC continues to expect 0.8% GDP growth for the bloc in 2024 and 1.4% in 2025, revised down from 1.5%. We expect 0.3% growth this year and 0.8% in 2025. Meanwhile a second official estimate of first quarter (Q1) GDP showed the bloc’s economy expanded at 0.3% while the annual inflation rate was 2.4% in April, stable compared to March, and down from 7.0% a year ago.
Figure in focus: -2.0%
Japan’s economy shrank 2.0% in Q1 on an annualised basis, more than expected and a sharp reversal from Q4’s downward revised flat outturn (from 0.4% growth). The weak yen, which recently fell to a 34-year low against the US dollar, dampened consumer and business spending. Capital expenditure fell 0.8% on a quarterly basis in Q1 while private consumption, which accounts for more than half of GDP, fell 0.7%, where analysts had predicted a 0.2% decline. Rising wages and income tax cuts are expected to boost consumption in the coming quarters but the data could prompt the Bank of Japan to hold off tightening monetary policy further after it raised interest rates in March.
Words of wisdom
GPT-4o: As artificial intelligence (AI) continues to advance, ChatGPT maker OpenAI announced a new model, GPT-4o, which it said would be capable of realistic conversations and real-time language translation. Meanwhile at an event in Switzerland, International Monetary Fund Managing Director Kristalina Georgieva said AI could bring a “tremendous increase in productivity if we manage it well”. However, she added that it could also lead to more misinformation and inequality in society.
What’s coming up?
Canada publishes its latest inflation data on Tuesday, while the UK and Japan follow with their own respective inflation updates on Wednesday and Friday. The Fed publishes the minutes from its latest monetary policy meeting on Wednesday while flash Purchasing Managers’ Indices covering May are issued for Japan, the Eurozone, US and UK on Thursday. Germany reports its Q1 GDP growth rate on Friday.
Related articles
One Week at a Time
- by
- 01 July 2024 (10 min read)
Rising prices, higher coupons
- by
- 28 June 2024 (5 min read)
June Monthly Investment Strategy - The times they are a-changin’
- by , ,
- 26 June 2024 (10 min read)
Fixed Income Market Update - June 2024
- by
- 26 June 2024 (3 min read)
June Op-Ed - Political risks get in the way of decent macro
- by ,
- 26 June 2024 (10 min read)
Disclaimer
The information on this website is intended for investors domiciled in Switzerland.
AXA Investment Managers Switzerland Ltd (AXA IM) is not liable for unauthorised use of the website.
This website is for advertising and informational purpose only. The published information and expression of opinions are provided for personal use only. The information, data, figures, opinions, statements, analyses, forecasts, simulations, concepts and other data provided by AXA IM in this document are based on our knowledge and experience at the time of preparation and are subject to change without notice.
AXA IM excludes any warranty (explicit or implicit) for the accuracy, completeness and up-to-dateness of the published information and expressions of opinion. In particular, AXA IM is not obliged to remove information that is no longer up to date or to expressly mark it a such. To the extent that the data contained in this document originates from third parties, AXA IM is not responsible for the accuracy, completeness, up-to-dateness and appropriateness of such data, even if only such data is used that is deemed to be reliable.
The information on the website of AXA IM does not constitute a decision aid for economic, legal, tax or other advisory questions, nor may investment or other decisions be made solely on the basis of this information. Before any investment decision is made, detailed advice should be obtained that is geared to the client's situation.
Past performance or returns are neither a guarantee nor an indicator of the future performance or investment returns. The value and return on an investment is not guaranteed. It can rise and fall and investors may even incur a total loss.
AXA Investment Managers Switzerland Ltd.