Economy in Brief: May 2023

• The upshot for the Belgian survey is that most conditions are considered to be a subpar (below a 50% standing), however, there's rather striking and surprising optimism on inflation even though Belgium is a country in the European Monetary Union and inflation in the union is high as the ECB has been slow to raise rates and still has work to do with interest rates well below the current inflation rate. Belgians don't seem to be too concerned about those factors. There is concern about the economic situation. The current assessment is that it is below par as unemployment concerns are beginning to creep higher. The survey overall is comparatively down beat with the exception of the inflation light expectation response.

• Consumer spending projected to be slow & steady this year and next.
• Housing activity weakens then rebounds.
• Price inflation will decelerate next year.

• Japan’s year-over-year CPI accelerated to 3.4% in April from 3.2% in March on a monthly gain of 0.6%. Even with that, Japan's CPI is decelerating as its 12-month gain of 3.4% diminishes to a 2.3% annual rate over 6-months and diminishes again to a 1.2% annual rate over 3-months. The year-on-year headline is getting all the attention in this report, but the sequential decline is worth paying attention to- but how much?

• Leading index continues yearlong decline.
• Coincident indicators rise again.
• Lagging indicators edge lower.

• Sales pick up following Q4 lethargy.
• Nonstore retail sales firm.
• Most other categories weaken y/y.

Financial markets were a little unsettled earlier this week but heightened optimism about the willingness of US politicians to raise the US debt ceiling has calmed some fears. Incoming economic data, however, have taken a turn for the worse and there is arguably now mounting evidence to suggest that tighter monetary policy is beginning to exact a heavier toll. Against this backdrop, our charts this week look at the expectations for US monetary policy that are now implicit in the shape of the US yield curve (in chart 1). We turn next to the trend toward private sector deleveraging that’s being instigated by tighter monetary policy (in chart 2). China’s economy is our next focus (in chart 3) and the accumulating evidence to suggest that its reopening phase has failed to live up to expectations. That’s an indirect message too from the drag on Japan’s economy from net trade in Q1 that we subsequently explore (in chart 4). A slowing UK labor market and the welcome messages this is offering the Bank of England in its inflation-fighting campaign is our next focus (in chart 5). Finally, and staying with inflation issues, we explore what US companies have to say about demand pressures and profit margins and their impact on prices (in chart 6).

• Sales fall to three-month low.
• Decline occurs throughout country.
• Home prices continue to rebound from January low.