US: Housing starts (May): 1572k vs 1630k expected (prior: 1517k revised from 1569k)
- Building permits: 1682 k (1730 k expected) from 1733 k the prior month.
- Momentum has weakened on both housing starts and building permits over past months, due to rising prices and low inventories.
- Data remained high in absolute terms, but more volatility could be seen in next months and data to move sideways after strong rebound.
UK: CPI (May): 0.6% m/m vs 0.3% expected (prior: 0.6%)
- Prices remained on a sustained monthly path, driven by clothes, household goods, transport and leisure goods. Inflation picture results from the combination of base effects from energy and reopening sectors.
- The yearly trend has accelerated further from 1.5% y/y the prior month to 2.1% y/y. The BoE should remain patient regarding transitory rise in inflation.
UK: PPI Input prices (May): 1.1% m/m vs 1% expected (prior: 1.2%)
- Prices remained sustained; while fuel prices were down over the month, raw material prices were up by 1.1% m/m.
- Yearly trend has accelerated further from 10% y/y the prior month to 10.7% y/y.
UK: PPI Output prices (May): 0.5% m/m vs 0.4% expected (prior: 0.5%)
- Energy prices and other sectors remained on sustained monthly path; core output prices were up by 0.4% m/m after 0.5% m/m the prior month.
- Yearly trend has accelerated further from 4% y/y the prior month to 4.6% y/y.
China retail sales: 12.4% y/y vs expected 14.0% (prior: 17.7%)
- In sequential terms, retail sales expanded by 0.81% m/m, up from 0.25% in April. All categories experienced positive growth, but areas related to services and soft consumption remained more resilient, including catering (26.6%) and online sales (24.7% y/y).
- On the contrary, demand was most sluggish for automotive (6.3% y/y) and home appliances (3.1% y/y).
- Going forward, we expect that domestic demand will recover to 15.0% y/y in 2021, reversing a contraction in 2020. A stabilization in the labour market will also prove supportive. The unemployment rate declined further to 5.0% y/y in May, down from 5.1% in April.
China industrial production: 8.8% y/y vs expected 9.2% (prior: 9.8%)
- Despite the pace of increase missed expectations, industrial production expanded at a sequential pace of 0.52% m/m.
- The growth in value added was led by industrial robots and integrated circuits (166.3% y/y), high-tech manufacturing (17.5% y/y) and electricity (11.0% y/y). This can be largely attributed to an increase in input costs, following a surge in the price of commodities and semiconductors. We expect that industrial production will stabilize around 9.0% y/y in 2021.
China fixed-asset investments: 15.4% YTD y/y vs expected 17.0% (prior: 19.9%)
- Property investment declined to 18.3% y/y vs expected 19.5% (prior: 21.6%). In sequential terms, investments increased by 0.17% m/m, led by an increase in high-tech (25.6% y/y) and medical equipment (48.3%).
- Better earnings and higher prices will help to fuel private sector capital expenditure, offsetting a more austere fiscal budget. FAI to stabilize around 7.0% y/y in 2021.
- Chinese activity indicators declined in May, as the economy continued to stabilize from a record expansion in Q1-21. Despite this contraction was expected, all activity indicators missed forecasts, but the underlying data was more sanguine, pointing to a shy recovery in sequential terms. We expect that the pace of policy tightening will slow in the coming months, as: 1) the bulk of the work was already conducted in March and April; and 2) in order to avoid derailing the scrawny recovery in domestic demand.