Week in review

• U.S. unemployment rate rose to 3.7%, average hourly earnings rose 4.3% y/y
• Japan unemployment rate declined to 2.6%, retail sales rose 5.1% y/y
• Eurozone CPI eased to 6.1% y/y, unemployment rate stayed at 6.5%

Week ahead

• China export, import, Markit Caixin services PMI
• Eurozone PMI, retail sales
• Japan household income

Thought of the week

China NBS manufacturing PMI declined to 48.8, showcasing a further slide in economic activity in May and adding to concerns on the Chinese economic rebound running out of steam. While China’s Caixin manufacturing PMI rose to 50.9, which contrasted with the decline in NBS manufacturing PMI, the NBS PMI is a more representative of the overall manufacturing sector in China due to its larger sample size and balanced weighting by industry, region, and size. Weak confidence among households and private sectors remain as obstacle for recovery of domestic demand as the government decided against fiscal handouts to boost household and business balance sheets. In addition, real estate policies remain restrictive in tier-one cities, which elevated the pressure on secondary markets and local government finances. To help households, the government may decide to cut interest rates on outstanding mortgage loans. This would help to address the distortions in the domestic loan market caused by household repaying their existing mortgages by taking out corporate loans at lower rates. Stimulus in the form of fiscal spending, infrastructure investment, local government debt monetization could be deployed if economic data continues to soften in the following months.

EChina Caixin Markit and NBS Manufacturing Purchasing Managers’ Index (PMI)

Source: FactSet, J.P. Morgan Asset Management. Data reflect most recently available as of 03/06/23.

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