Overview of the week commencing 8 May
Graham Cross, CEO
As expected, Emmanuel Macron won the run off and will be the next French president. Markets had already factored in this result so we see no immediate impact following this result.
Elsewhere, the Chinese manufacturing index (PMI) fell to 50.3 in April. Dr Zhengsheng Zhong, Director of Macroeconomic Analysis speculated that the ‘Chinese economy may be starting to embrace a downward trend in the near term…’. There’s a hint of the dramatic in that statement. The latest reading still lies positively north of the neutral 50.0 mark.
Mind you, the China services PMI fell in April too, from 52.2 to 51.5. That signals a broader slowing in the pace of economic expansion. In previous briefings we’ve suggested that all will be well so long as manufacturing remains a little, but not too much, above 50.0 at the same time as services remain some way above 50.0. The latest results just about remain inside those bounds.
On US non-farm payroll, 210,000 new job positions were filled in April. This figure is higher than forecast but suitably in line with expectations for a rebound on the 79,000 new jobs posted in March. On the face of it, there was more good news as the unemployment rate fell from 4.5 percent to 4.4 percent – a rate not seen since May 2007, before the Financial Crisis. That fall, though, came for the wrong reasons; the labour force participation rate slipped.
Less good news, is the muted rise in wages. 2.5 percent is just a little ahead of a 2.4 percent rise in consumer prices.
What is clear though, is that the US economy is in good-enough fettle to take another rate rise. That, we think, will come in June.