Summary for the 2nd of May 2019


As expected, there were no new signals about the US monetary policy from yesterday’s Fed’s interest rate decision meeting, and the target federal funds rate was held still at 2.25% – 2.50%. The Fed didn’t see a strong case for neither a rate cut or a rate hike.

The Federal Reserve’s Chairman, Jerome Powell said that the economic growth had been stronger than anticipated while inflation had been weaker due to temporarily factors such as declining fee on financial services. He also was less pessimistic about the global uncertainty due to better than expected economic indicators from the EU area and China, progression in the US-China trade talk and less uncertainty from Brexit.

The US ISM Manufacturing PMI declined more than market had expected. The index fell to 52.8, and confirmed the last few month’s downward trend. This should also be seen together with the negative impact from the trade conflict between the US and China and the weak global development. If the index kept declining, it won’t be far until the critical value of 50 (the value which defines the economic expansion from a contraction).

The US Consumer Confidence for April increased more than expected. The index rose from 124.2 to 129.2. The assessment of the current economic conditions and the economic outlook both contributed to increase the index. The index is almost back to the average value in 2018. Consumer confidence had been falling in December and January due to the uncertainty in the financial market.

The GDP flash estimate for the first quarter of 2019 for the EU area gave a positive surprise. GDP rose by 0.4%, the market was expecting 0.3% increase. The growth had doubled from the fourth quarter of 2018 to the first quarter of 2019, which came as a surprise after several disappointment from the economic indicators in the last quarter. From the major EU countries, Italy had contributed positive with an increase from -0.1% in the fourth quarter to +0.2% in the first quarter, Spain from 0.6% to 0.7% while unchanged in France of 0.3%. The unemployment rate in the EU also showed a positive surprise with a decline from 7.8% to 7.7% in March. The market was expecting unchanged value. Only four countries had a higher than the average unemployment, France, Italy, Spain and Greece. Inflation rate in Germany also gave another positive surprise which rose to 2.1%, above the expectation of 1.7%.

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