In today’s briefing:
- US CPI Inflation 3.27% y-o-y (consensus 3.4%) in May-24
- CX Daily: Turning Research Into Revenue – China’s Quest to Bring Lab Inventions to Market
- Iron Ore: Disappointing Data Pushed Price Down to 105, Bounce To 120 On Further Stimulus From China
- UK: Structural Trend Imputation
- EM Watch: Is China making a fool out of Western metals speculants?
- Thailand Policy Rate 2.5% (consensus 2.5%) in Jun-24
- US CPI Review – Admittedly a soft report, but NOT the new normal
- India CPI Inflation 4.75% y-o-y (consensus 4.9%) in May-24
- China CPI 0.3% y-o-y (consensus 0.4%) in May-24
US CPI Inflation 3.27% y-o-y (consensus 3.4%) in May-24
- US CPI inflation for May 2024 was reported at 3.27% year-on-year, the lowest growth rate since February 2024, and slightly below the consensus estimate and the previous month’s figure.
- Despite a decrease in headline inflation, core CPI inflation remained stable at 3.4% year-on-year.
- This stability in core CPI inflation is due to persistent producer price pressures, indicating sustained underlying inflationary pressures.
CX Daily: Turning Research Into Revenue – China’s Quest to Bring Lab Inventions to Market
- Cover Story: Turning research into revenue – China’s quest to bring lab inventions to market
- Peru amends law allowing Cosco Shipping to retain exclusive rights to operate Chancay Port
- In Depth: How Hong Kong could help craft mainland policies for digital assets
Iron Ore: Disappointing Data Pushed Price Down to 105, Bounce To 120 On Further Stimulus From China
- Iron ore continued to operate in its band from 95-130 USD/ton over the last few years, with a recent drop from 120 USD/ton to 105 USD/ton on tepid China data.
- With incremental news on China’s stimulus in the property and infrastructure sectors, we remain confident that iron ore will return to 120 USD/ton in the short term.
- We also remain bullish on the 65-62 spread, which has expanded to the teens. Rio Tinto Ltd (RIO AU) and Vale (VALE US) are good plays on the spread.
UK: Structural Trend Imputation
- Sustaining the Q1 rebound in April suggests economic trends have improved in 2024 to about 0.3% q-o-q for demand and 0.4% for supply amid slightly rising unemployment.
- The fading positive supply shock from falling energy prices should slow those trends before policy aligns at neutral such that both trends converge at 0.3% q-o-q in 2025.
- Easing before expectations have re-anchored with the target risks excessively high inflation, compounding the UK risk of rates reversing higher relative to other countries.
EM Watch: Is China making a fool out of Western metals speculants?
- Hot on the heels of watching Powell’s press conference, which pushed back slightly against renewed rate-cut optimism, it’s clear that the Fed is playing a cautious game.
- Despite the soft inflation data this morning, they significantly changed the dot plot.
- They likely believe the CPI report was noisy due to a sudden deflation in transportation.
Thailand Policy Rate 2.5% (consensus 2.5%) in Jun-24
- The Bank of Thailand maintained its Policy Rate at 2.5%, with a 6 to 1 vote, reflecting a cautious approach amid structural challenges and ongoing economic uncertainties, particularly in the export sector.
- It projects economic growth at 2.6% in 2024 and 3.0% in 2025, driven by strong domestic demand, tourism recovery, and accelerated government disbursements, while structural impediments continue to weigh on export performance.
- Inflation should gradually increase towards the target range by the fourth quarter of 2024, with headline inflation projected at 0.6% for 2024 and 1.3% for 2025, necessitating careful monitoring of external and domestic factors that could influence inflation dynamics and future policy decisions.
US CPI Review – Admittedly a soft report, but NOT the new normal
- The CPI report today was admittedly softer than our initial hawkish forecasts, with headline coming in unchanged at 0.0% MoM vs 0.1% expected while core came in to the soft side of 0.2% MoM vs 0.3% expected.
- Our anticipation of rising goods-flation didn’t play out fully, and while shelter re-accelerated as we forecasted, core services disinflated heavily in May due to auto insurance costs declining.
- The main culprit behind the dovish CPI report was the sudden drop in Motor Vehicle Insurance (chart 2.b), which has so far been printing at trend MoM levels around 1-1.5%, lifting headline inflation by 0.03-0.05% consecutively.
India CPI Inflation 4.75% y-o-y (consensus 4.9%) in May-24
- India’s CPI inflation for May 2024 was 4.75% year-on-year, lower than the predicted 4.9%, and the lowest since May 2023.
- There has been a slowdown in CPI inflation and subdued wholesale price movements, especially in the manufacturing sector.
- This suggests a potential easing of inflationary pressures, which could provide economic relief and lead to adjustments in monetary policy.
China CPI 0.3% y-o-y (consensus 0.4%) in May-24
- China’s CPI remained stable at 0.3% year-on-year in May 2024, indicating modest inflationary pressures.
- Despite this stability, the CPI was slightly above the one-year average.
- Other economic indicators, such as declining new house prices and robust monetary and credit growth, suggest potential future inflationary dynamics.