Week Ahead Economic Preview: Week Of 18 April 2022

 | Apr 17, 2022 09:10

h2 April flash PMIs, China Q1 GDP and data barrage in focus

Flash PMIs released in the coming week across major developed economies offer a first look into the degree to which these countries have been affected by the Ukraine war and China lockdowns so far in April. Data out of China including Q1 GDP, March retail sales and industrial production will also offer clues on the impact of the stricter COVID-19 restrictions on economic activities. Meanwhile Canada and the eurozone update inflation figures while policymakers at Bank Indonesia meet in the week.

Midway into April, concerns over geopolitics, the global macro economy and monetary policy remain at the top of investors' minds as seen through the lens of the latest April S&P Global Investment Manager Index . The survey shows US equity market returns in the next 30 days are expected to remain in negative territory. With that said, we did find western economies, notably including the US, faring well in March on the back of easing COVID-19 containment measures that buoyed services performance. Worries over demand destruction as a result of heightened price pressures had also been temporarily allayed for the likes of the US and UK. Whether this can continue into April remains to be seen, especially with China's deteriorating virus conditions having added to supply concerns.

Likewise across in APAC, Japan felt the heightened price pressures in March due to the COVID-19 disruptions in China. Although inflationary pressures were not as severe for APAC economies compared to their western counterparts, business confidence was adversely affected, and signs of any feed through of the darkening mood into actual output and demand changes will be eagerly assessed in next week's data.

Finally, official China's Q1 GDP growth and March retail sales and industrial production data will be in focus after the latest Caixin PMI readings indicated that both the manufacturing and service sectors contracted at the fastest pace since the pandemic first began.

h2 April flash PMIs: demand resilience facing tough headwinds/h2

Flash PMIs will provide the first indications of economic in April, with insights into a number of issues eagerly awaited.

March data had shown the US and UK being buoyed by the further reopening of these economies from COVID-19 health restrictions, but growth in the eurozone had been subdued by the Ukraine invasion while mainland China sank into a steep decline amid fresh lockdown measures. Rising prices meanwhile remained prevalent, leading to a worsening inflation outlook, likely to have bene exacerbated further in April by the twin effects of China's new lockdowns and the Russia-Ukraine war.

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The global economy is therefore facing numerous headwinds, with the ongoing pandemic and war in Europe adding to supply delays and inflationary pressures, the latter not only severely dampening consumer sentiment around the world as well as pushing central banks into more hawkish stances.

Key to the outlook will therefore be the degree to which demand can remain resilient in the face of these headwinds. Global service sectors are likely to be buoyed by the tailwind of the further easing of travel restrictions, but are higher prices starting to destroy demand? One insight here is the number of PMI survey respondents globally who report that their output is being buoyed by 'rising' or 'recovering' demand. So far this year, this has fallen to the lowest since the pandemic upturn began in the second quarter of 2020, lifting only modestly in March from the Omicron-induced weakness seen at the very start of the year. These data suggest much of the boost to demand from the pandemic opening up has now faded, hinting at weaker growth in coming months.