Closures in China disrupt global supply chains

Bloomberg— China’s lockdowns to contain Covid-19 have paralyzed operations at the world’s largest port in Shanghai and brought activity to a standstill in major cities.affecting the supply chains of companies from Tesla Inc. (TSLA) to Apple Inc (AAPL).

Monday’s trade data will provide clues as to the extent of the damage. Chinese export growth likely slowed to its weakest pace since June 2020while imports likely contracted for a second month, a sign of weak consumer spending as millions of residents in Shanghai and elsewhere were confined to their homes.

As a manufacturer for the world, Disruptions in China weigh on the global economy and add another risk to the inflation outlook. In Shanghai, where most of the population has been under some form of lockdown for more than five weeks, the government is trying to restart production. However, many foreign companies say they are still unable to resume operations.

Early trade indicators are not promising. South Korean exports, a barometer of global demand, grew double digits in Aprilbut shipments to China fell, suggesting that China’s slowdown is a product of its own Covid-19 restrictions.

“Disruptions in production and deliveries can negatively affect shipments. The production and deliveries components in the official PMI data for April deteriorated to the worst levels since the nationwide lockdown in early 2020.”

What Bloomberg Economics says:

China’s inflation data will also be the subject of attention, as shortages of food and other goods, also caused by lockdowns, drive up costs. Consumer price growth is expected to accelerate, while factory inflation likely remained elevated in April.

The top leaders of the Communist Party have promised more stimulus to meet the economic growth target of around 5.5% this year. Credit data for April, due this week, will show whether monetary and fiscal support has had the desired effect of stoking lending.

On the other hand, the United States could see another high inflation figure, UK gross domestic product data for Q1 could already hint at stalling growthand Mexico’s central bank is likely to raise interest rates again.

Asia

Apart from China, Asia highlights are Wednesday’s interest rate decision in Malaysiawhere officials are likely to depart from the global tightening trend as inflation remains subdued and downside risks to the economy persist.

Following the surprising rise of the Reserve Bank of India, April inflation data will be reviewed on Thursday as economists reassess their policy forecasts.

Indonesia and the Philippines release first-quarter GDP data on Monday and Thursday. In Japan, data on wages and household spending will be released early in the week.

USA

April’s Consumer Price Index report, to be released on Wednesday, is the highlight of a quiet week for economic releases. Inflation is expected to have moderated in both monthly and annual terms, partly reflecting a decline in gasoline prices that have risen again.

Although inflation probably peaked in March at 8.5%, the highest in four decades, price pressures are expected to remain elevatedwhich will keep Federal Reserve officials on track to steadily raise borrowing costs in the coming months.

Although US inflation is likely to have peaked, it is still seen to be heating up for monthsdfd

After the Fed’s benchmark interest rate hike of half a point on Wednesday, Investors will be watching speeches from central bankers including John Williams, Christopher Waller, Thomas Barkin and Loretta Mester.

A measure of the prices paid to producers in April will be published on Thursday, which is expected to show some moderation in the pace of wholesale inflation. The week closes with the consumer sentiment reading from the University of Michigan.

Europe, Middle East and Africa

Economists predict a respectable 1% increase in UK GDP for the first quarteralthough this may mask a period without any growth in March.

This data on Thursday will illustrate the backdrop to an outlook that the Bank of England says is turning very sour, with double-digit inflation likely to crush any expansion towards the end of the year.

The BOE has underestimated the pick-up in UK inflation this yeardfd

Thursday, the Bank of England revealed that scenario by making a fourth consecutive rate hike. On Monday, the head of monetary policy, Michael Saunders, will deliver a speech in London.

Economists expect the ZEW gauge of investor expectations in Germany to fall further in April from a level that was already the worst since the pandemic broke out in 2020.

Eurozone industrial production, forecast for Friday, It has probably shrunk noticeably. Several policy makers from the European Central Bank will speakincluding President Christine Lagarde on Wednesday.

Among the inflation reports to be released this week, that of the Czech Republic, to be published on Tuesday, could reach a new high above 13% in April.

However, Russia’s will be even higher. Economists forecast inflation to top 18%, a dramatic rise in just two months, doubling since the invasion of Ukraine. The central bank anticipates further price increases.

The Russian central bank raises the inflation forecast after the start of the wardfd

Other reports include Russian trade data on Wednesday, noting the impact of sanctions on imports and exports in March, and car sales figures for April.

In Ghana, Wednesday’s data is expected to show inflation has accelerated further from nearly 20% in Marchwhich was the highest rate in more than a decade.

The country’s central bank meets at the end of this month, and economists forecast it could raise rates by as much as 200 basis points.

Latin America

Monday, Mexico publishes consumer price data for April, both monthly and fortnightly, before the central bank makes a decision on interest rates throughout the week. According to early estimates, annual readings are stabilizing near two-decade highs for both core and overall results.

With inflation already double the 3% target, Most analysts expect Banxico to raise the official interest rate to 7% on Thursday, with a fourth consecutive rise of half a point and the eighth in total. The consensus is around 8.5% as the probable end-of-year level for the official interest rate.

Mexico's inflation hits a new two-decade high, and Banxico catches up dfd

In Brazil, the annual consumer price reading for April is expected to exceed 12%, more than triple the target. After raising its interest rate to 12.75% on May 4, the central bank signaled that an 11th consecutive rate hike is likely next month.

Argentina’s monthly consumer prices are expected to have cooled down after the 6.7% increase in March, although the annual rate has exceeded 56%. Many local economists believe that the annual rate will reach 60% by the end of the year.

  Peru is expected to raise the main interest rate in its tenth consecutive meeting, and more increases are expecteddfd

In Peru, the central bank, which is battling the fastest inflation in two decades, should extend its tightening cycle and raise the interest rate to 5%. Like its regional counterparts, the bank is not done yet.

–With the help of Robert Jameson, Vince Golle, Benjamin Harvey, Nasreen Seria and Zoe Schneeweiss.

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