Macro Snapshot — Spain’s inflation resumes upward trend; S.Korea export growth seen rebounding

RIYADH: Spanish 12-month inflation resumed its upward trajectory in May after a dip in April as prices other than energy and food rose at their fastest pace in two decades, preliminary data from the National Statistics Institute showed on Monday.

Spanish annual inflation accelerated to 8.7 percent in May, up from 8.3 percent the previous month, INE said.Twelve-month inflation stood at 9.8 percent in March, its highest level since 1985.

Annual inflation was higher than the 8.3 percent forecast by analysts polled by Reuters.

The economic fallout from Russia’s invasion of Ukraine has fueled inflation worldwide, especially through increasing prices of energy and grains.

Core inflation, which strips out volatile food and energy prices, rose to 4.9 percent year-on-year in May, a 26-year high, from 4.4 percent a month earlier, the INE data showed.

S.Korea export growth seen rebounding

South Korean export growth is expected to have rebounded in May, but the trade balance likely remained in red, while consumer inflation is seen rising above 5 percent for the first time in nearly 13 years, a Reuters poll showed on Monday.

Outbound shipments were seen 19.3 percent higher in May than a year earlier, according to a median forecast of 19 economists, accelerating from a revised 12.9 percent annual growth seen in April and ending two months of slowdown.

Although South Korea’s economy is still under pressure from China’s COVID-19 lockdown measures and the Ukraine crisis, economists attributed the growth to the calendar effect of two more working days and a recovery in shipments to China.

Imports were seen outpacing exports by growing 31.9 percent, according to the survey, also accelerating from 18.6 percent seen in April to the fastest rise in four months.

The country’s trade balance was projected as a $2.59 billion deficit, a median of 16 forecasts showed, following a $2.5 billion deficit in the previous month.

German inflation reaches 8.7 percent 

German inflation rose more than expected in May, pushed up by ever-rising energy prices since the start of the war in Ukraine, data showed on Monday.

Consumer prices, harmonized to make them comparable with inflation data from other EU countries, increased an annual 8.7 percent, a rise from April’s 7.8 percent, the Federal Statistics Office said on Monday.

A Reuters poll of analysts had pointed to an overall annual German HICP reading of 8 percent in May.

Turkey’s inflation seen at 76.55 percent 

Turkey’s inflation rate is expected to have risen to a nearly 24-year high of 76.55 percent in May due to high food and energy prices as well as the weakening lira, a Reuters poll showed on Monday, while the median estimate for the end of the year rose to 63.5 percent.

Turkey’s consumer price index has surged since last autumn as the lira weakened after the central bank in September embarked on a 500 basis-point easing cycle long sought by President Recep Tayyip Erdogan.

The lira’s slide and rising food and energy prices pushed inflation to 69.97 percent in April, the highest in 20 years, despite tax cuts on basic goods and government subsidies for some electricity bills to ease the burden on household budgets.

The median estimate of 14 institutions in the Reuters poll for annual consumer price inflation in April was 76.55 percent, with forecasts ranging between 72.50 percent and 80.40 percent.

Japan growth to be weaker

Japan’s economy will grow at a weaker rate than previously thought this quarter despite hopes for a strong rebound in consumption after showing resilience in the three months through March, a Reuters poll of economists showed.

The world’s third-largest economy is at risk of being hobbled by slowing economic growth in China and a surge in global raw material prices — both issues that could hurt Japan’s key manufacturing sector, the poll showed.

However, the slower expansion still indicates growth will be strong enough for the economy to recover to its pre-coronavirus pandemic levels of end-2019 this quarter, about 70 percent of poll respondents said.

The economy was projected to expand an annualized 4.5 percent this quarter, below April’s estimate for 5.1 percent growth, according to the median forecast of 36 analysts in the May 18-27 poll.

“The speed at which the economy is recovering at home is slow,” said Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute.

UK inflation expectations stick at high levels 

The British public’s expectations for inflation have held stable this month but at high levels that are likely to keep the Bank of England on alert about price growth risks, according to a survey published on Monday.

US bank Citi and polling firm YouGov said their gauge of expectations for inflation in five to 10 years’ time held at 4.2 percent in May, unchanged from April.

Public inflation expectations for the coming 12 months edged up to 6.1 percent, matching March’s record high, from 6 percent in April.

Citi economist Benjamin Nabarro said the figures were likely to mean the BoE remains concerned about medium-term inflation expectations.

“However, we see little in today’s data that should provide a further impetus for an out-sized 50bps move,” he said, referring to the possibility of a half percentage-point interest rate increase.

(With input from Reuters)