Fisher Investments recaps the biggest market, political and economic news from last week, including US, UK and Chinese May retail sales figures, US May Leading Economic Index (LEI) reading and The Federal Reserve and Bank of Japan monetary policy decisions.
In the US, the Conference Board’s May Leading Economic Index (LEI) increased 1.3% from the prior month—higher than consensus estimates. May manufacturing and industrial production rose 0.9% m/m and 0.8% m/m, respectively—both beating expectations. May retail sales rose 28.1% y/y, but fell 1.3% m/m. While it may seem counterintuitive, May's month-over-month decline in retail sales is good news, in our view—it indicates more businesses have reopened in the broader services sector, and people shifted spending accordingly. For more, please see our 6/15/2021 commentary, “Retail Down, Services Up?” The Fed met on Wednesday to set monetary policy and left interest rates unchanged—but policymakers signaled they expect to raise rates by late 2023. While headlines focused on these projections, we suggest investors tune out the noise. Markets have no preset reactions to Fed actions, let alone talk about possible ones. Moreover, Fed forecasts are only opinions, which can change frequently and aren't ironclad.
In the eurozone, May core consumer prices (excluding energy, food, alcohol and tobacco) rose 1.0% y/y, higher than expected. April industrial production beat forecasts, rising 39.3% y/y and 0.8% m/m. In the UK, April GDP grew 2.3% m/m. As economic data continue to roll out, we expect pundits, politicians, policymakers and others to vigorously debate their meaning. For investors, though, we think these numbers confirm a reality stocks have already priced in and moved on from. For more, please see our 6/16/2021 commentary, “UK GDP Tells a Well-Known Story.” May core consumer prices (excluding food and energy) rose 2.0% y/y, higher than expected. May retail sales rose 24.6% y/y but fell 1.4% m/m. The unemployment rate for the three months ending in April declined slightly to 4.7%.
In Japan, April industrial production growth was revised upward to 2.9% m/m and 15.8% y/y. May imports rose 27.9% y/y, higher than forecast, while exports rose 49.6% y/y, lower than expected. May core-core consumer prices (excluding food and energy) fell 0.2% y/y. The Bank of Japan left short-term interest rates unchanged. In China, May retail sales and industrial production grew 12.4% y/y and 8.8% y/y, respectively—both lower than consensus estimates. May unemployment fell slightly to 5.0%.
The Week Ahead:
The US, UK, eurozone and Japan release June flash purchasing managers’ indexes (PMIs). The US reports its third estimate of Q1 2021 GDP and releases May new home sales and durable goods orders. The Bank of England meets to set interest rates. The eurozone reports May money supply (M3) growth. Japan releases April LEI data.
Source for all data cited is FactSet. This update constitutes the general views of Fisher Investments and should not be regarded as personalized investment advice. No assurances are made we will continue to hold these views, which may change at any time based on new information, analysis or reconsideration. In addition, no assurances are made regarding the accuracy of any forecast made herein. Global equities are represented by the MSCI World Index. The MSCI World Index measures the performance of selected stocks in 23 developed countries and is presented net of dividend withholding taxes and uses the maximum rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. Past performance is no guarantee of future results. A risk of loss is involved with investments in stock markets.