{"id":4259,"date":"2024-06-28T11:59:59","date_gmt":"2024-06-28T11:59:59","guid":{"rendered":"https:\/\/www.expanamarkets.com\/?post_type=insight&#038;p=4259"},"modified":"2024-08-16T17:39:18","modified_gmt":"2024-08-16T17:39:18","slug":"us-and-eurozone-inflation","status":"publish","type":"insight","link":"https:\/\/www.expanamarkets.com\/insights\/article\/us-and-eurozone-inflation\/","title":{"rendered":"This week in industrials\u00a0"},"content":{"rendered":"\n<!-- .module.article-rich-text: start -->\n<div id=\"\" class=\"module article-rich-text pt-40 md:pt-64 xl:pt-80 pb-40 md:pb-64 xl:pb-80 hidden show-small:block show-medium:block show-large:block [p_+_p]:mb-24\">\n\t<h2>Manufacturing strength continues in the Eurozone and China, but the US remains in contraction<\/h2>\n<p>The US ISM Manufacturing Index continued in contraction territory in May (below the 50-level), registering 48.7, down from 49.2 in April. The May result marks the second consecutive month of contraction after a growth figure in March. Timothy R. Fiore, Chair of the Institute for Supply Management, commented, \u201cUS manufacturing activity continued in contraction after growing in March, the first expansion for the sector since September 2022. Demand was soft again, output was stable, and inputs stayed accommodative.\u201d<\/p>\n<p>The new orders subindex declined markedly in May, falling 3.7 percentage points (p.p.) m-o-m to 45.4. Prices also subsided, decreasing by 3.9 p.p. to 57.0, with that subindex maintaining comfortable growth. New export orders showed improvement, entering growth territory after registering 50.6.<\/p>\n<p>The Eurozone Composite Purchasing Managers&#8217; Index rose to 52.2 in May, up from 51.7 in April, representing the fastest pace of growth in a year. The result was slightly below expectations of 52.3. Sources noted that demand has improved markedly, bolstering production and employment, while input cost inflation continues to slow.<\/p>\n<p>The Chinese Caixin manufacturing PMI rose to 51.7 in May, up from 51.4 in April, marking the seventh consecutive month in expansion territory. The April figure beat market sources\u2019 expectations of 51.5 and marks the fastest growth in nearly two years. Manufacturers\u2019 output rose to a near-two-year-high, with the demand environment also improving.<\/p>\n<h2>\n<p>US and Eurozone inflation remains elevated while China moves away from deflation<\/h2>\n<p>Inflation in the US was 3.3% y-o-y in May, down from 3.4% y-o-y in April, and the figure was unchanged m-o-m. The headline result was slightly below market forecasts of 3.4% y-o-y. Food inflation has decelerated markedly over the past two years, falling to 2.1% y-o-y, and now in a defined downtrend. However, transportation remains a key driver of headline inflation, registering 10.5% y-o-y, a figure that has been trending upward in recent months. Additionally, energy, specifically electricity, remains inflation, growing 3.7% and 5.9% y-o-y in May, respectively.<\/p>\n<p>Headline inflation decelerated in May but remains sticky. Market sources now only expect one 25 basis point (bp) cut in 2024, down from an expectation of seven cuts at the start of the year.<\/p>\n<p>Annualised inflation in the Eurozone was 2.6% y-o-y in May, up from 2.4% in April. The greatest m-o-m acceleration was observed in services, up 0.7% m-o-m, representing a 4.1% y-o-y rise, compared to 3.7% y-o-y in April. Annualised food, alcohol and tobacco inflation slowed to 2.6%, down from 2.8% in April. Energy inflation hit 0.3% y-o-y, the first inflationary figure for several months as prices of natural gas begin to rise off multi-year-lows.<\/p>\n<p>The European Central Bank (ECB) cut interest rates by 25 bps in June, which market sources had anticipated in recent months. ECB President Christine Lagarde stated that although the ECB had decided to cut rates, \u201cit doesn\u2019t mean interest rates are on a linear declining path,\u201d as she struck a cautionary note following the monetary policy meeting.<\/p>\n<p>The consumer price index in China was 0.3% y-o-y in May, unchanged from April. The result constitutes the fourth consecutive month of inflation after moving into deflationary territory. The May figure failed to surpass market expectations of a 0.4% y-o-y increase, but sources believe that consistent inflationary figures show that the Chinese economy is beginning to recover. The deceleration in producer prices eased in May, although demand generally remains sluggish.<\/p>\n<p>Despite improvements in the inflationary landscape in China, sources believe more central bank action is required to spur demand. To that end, market players expect greater stimulus in the coming months, as well as schemes to bolster youth employment.<\/p>\n<h2><a id=\"glass-blog\"><\/a><br \/>\nGlass supply remains ample while weak demand persists<\/h2>\n<p>In recent months, sources in the container glass markets have noted ample capacity on the supply side. One participant stated, \u201cavailability is now very good. We aren\u2019t encountering any issues at all.\u201d Another Europe-based player claimed, \u201cthere is plenty of free capacity.\u201d<\/p>\n<p>These reports come amid a period of sluggish demand within the market, with persistently high interest rates squeezing all parts of the supply chain. The dynamic has moved some players to consider scaling down or halting production at some facilities. However, for the moment, production is ample, with the EU Manufacture of Glass and Glass Products Index up 7.7% month-on-month (m-o-m) in March (latest data). The current market situation is not unique to Europe, though, with sources in China stating that demand from Western countries has declined due to continued disruption in the Red Sea.<\/p>\n<p>For reference, the UK and Western Europe Medium Food Jar benchmarks rose 0.8% and 4.4% m-o-m, respectively, due to recent increases in natural gas prices.<\/p>\n<p>Expana will provide updates on the market situation as more information becomes available.<\/p>\n\t<\/div>\n\t<!-- .module.article-rich-text: end -->","protected":false},"excerpt":{"rendered":"","protected":false},"author":8,"featured_media":2890,"template":"","tags":[118,164,120],"insight-theme":[166],"insight_topic":[165],"news_topic":[],"class_list":["post-4259","insight","type-insight","status-publish","has-post-thumbnail","hentry","tag-economics","tag-industrials","tag-metals-and-industrials","insight-theme-weekly-market-insights","insight_topic-industrials-and-metals"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.6 (Yoast SEO v27.6) - 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