Coffee Break

Coffee Break:
  • Week

Last week in a nutshell 

  • Global inflation reached new highs and will remain at elevated levels for longer. US inflation reached 8.3% in April, slightly higher than expected, but below the previous month’s level. Inflation may be peaking but is unlikely to come close to the Fed’s target anytime soon.
  • ECB President Christine Lagarde highlighted the challenge triggered by the war in Ukraine as it is hindering growth rates and fuelling inflation. Investors expect a first rate increase in July, followed by two additional 25bp steps this year.
  • Economic sentiment in the euro zone recovered somewhat from the Ukraine-war related drop in March but remains in negative territory. Meanwhile, US preliminary data hints at crosscurrents: the consumer is reassured by the strong labour market and rising wages but concerned by the high inflation and rising interest rates, both eroding its purchasing power.
  • China’s zero-COVID-19 lockdowns have hit business hard but authorities maintain their ambitious GDP growth target of 5.5% for this year. The most recent COVID-19 outbreak started 2 months ago and is forcing authorities to consider using earlier and/or even looser monetary and fiscal policy tools.

What’s next?

  • Industrial activity and consumption-related data will be published in China, Europe and in the US. The figures will show how resilient private demand remains amid the persistent high-inflation context.
  • In the US, housing market data will be in the spotlight. The NAHB housing market index, building permits, housing starts, and existing home sales will all be published in the coming days.
  • Fresh data on the euro zone labour market is expected. While the pandemic had created regional divergence between South and North, a broad recovery is on its way.
  • The People’s Bank of China, under mounting pressure to not only remain loose but also take more action to support economic growth, will release 1-year and 5-year loan prime rates.

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