Every Monday, Mint’s Plain Facts section features five key data posts to watch for during the week. Vehicle sales data for May will be released this week and will help us quantify the impact of the foreclosure on the auto sector. Data on mutual fund flows will also be released. Global markets will await monetary policy inflation figures from the United States and the European Union (EU) at a time when both economies are rapidly recovering.
1. Automotive sales
The Company of Indian Automobile Manufacturers (Siam) will release its automotive production and sales figures for the month of May on Thursday. Sales had remained modest in May 2020 due to the nationwide lockdown. The numbers are also expected to be dismal this year, as the segment experiences a slowdown in consumption, with most states coming under restrictions again. In April, car sales had already registered a sequential decline of 10%. Sales of two-wheelers were even more impacted (34%).
However, a report from Sharekhan expects the passenger vehicle segment – two and four wheelers – to remain strong even in the midst of the pandemic, as preference for personal mobility options increases. Given the likelihood of a normal monsoon, higher reservoir levels and exceptional kharif plantings last year, rural demand is expected to recover strongly in the southern and western belts. The industry is expected to roll out later in the year as pent-up demand drives growth from the September quarter.
2. Mutual fund flows
Equity UCITS recorded net inflows in March and April after eight months of outflows. The quantum however fell to ₹3,437 crore in April from ₹9,115 crore in March, largely due to further disruption caused by the second wave of covid-19 infections. May data, due Tuesday by the Association of Mutual Funds of India (Amfi), will show which direction investor money was heading in May.
The 30-stock Sensex index had fallen 1.5% in April, but was back on positive ground in May, recording its biggest monthly gain of 6.5% this year. Data from the Securities and Exchange Board of India suggests investors may have pulled money off the table in May, much like cash outflows through February due to profit recognition.
Sentiments remained vibrant as covid cases were on the decline. However, market participants will remain alert to any short-term setbacks.
3. American inflation
The United States will release its consumer price inflation data for May on Thursday. In April, retail price inflation had jumped to 4.2%, reaching a 13-year high and almost double the Federal Reserve’s target. Ongoing supply disruptions and an increase in post-pandemic demand are fueling the rapid rise in prices. There are also other indications of a strong recovery as the world’s largest economy reopens after immunizing a significant portion of its population. Weekly jobless claims hit a new low during the week ended May 22. Attention is also drawn to a multibillion-dollar stimulus proposed by Joe Biden’s administration in May, which could fuel underlying inflationary pressures even further. The April surge worried investors: Will the Fed act quickly on its lax policy? The Fed, for its part, continues to insist that inflation is “transient” and could return to its target of 2% by 2022.
4. ECB policy
The Governing Council of the European Central Bank (ECB) meets on Thursday to review its monetary policy. As in the United States, the challenge is clear: rising inflation at a time when it may be too early to withdraw stimulus.
Nonetheless, some analysts expect a resumption of vaccination and an overall balanced growth outlook to slow the pace of the ECB’s asset purchase program, in place since March 2020. At its last policy meeting in April, the council reaffirmed that it would continue the program until at least March 2022, or until the covid-19 crisis appears to be over. The accommodative stance of policy aims to help 19 eurozone economies come out of recession. The ECB’s goal is to keep inflation below 2%, but rising energy prices have pushed retail price inflation beyond the comfort zone. With the ECB insisting that inflation is driven by temporary factors, market participants will keep tabs on clues of its policy directions.
5. China’s trade balance
China’s General Customs Administration will release its foreign trade data for May on Monday. The country’s trade figures have been surprisingly on the rise of late. Exports jumped 32% in April from 31% year-on-year growth in March, beating market estimates. Imports grew at an even faster pace, 43%, while the trade surplus rose from $ 13.6 billion in March to $ 42.9 billion in April. Will the numbers challenge the estimates again?
Experts said the reopening of developed economies is boosting global demand. This bolsters China’s exports, while imports are supported by rising commodity prices and weak base last year. In 2020, China’s share of world exports hit an all-time high of nearly 15% as its outbound shipments remained resilient, according to data from the United Nations Conference on Trade and Development. The big question is whether these high growth levels are sustainable in the medium to long term.
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