Last week review:
Signs of a recession have indeed emerged more clearly, at least in last week’s US economic data, starting with the ISM Manufacturing PMI & Prices (Mar.) which contracted, followed by Factory Orders whose growth was still weaker than expected. Similarly, the ISM Non-Manufacturing PMI & Employment (Mar.) report, which clearly contracted from the previous period, also came in lower than expected. The characteristics of a slowing US economy were also evident from the report on the employment sector, when the JOLTs Job Openings figure dropped to 9.931mn, below the forecast of 10.4mn. The hourly wage rate (Mar.) was observed to grow lower at 4.2% yoy (below forecast 4.3% & previous 4.6%). As a result, during last month Nonfarm Payrolls (Mar.) successfully fell to 236k (from previous 326k). Throughout last week, Initial Jobless Claims actually recorded an increase to 228k from a forecast of 200k (although still lower than the previous week at 246k). However, the Unemployment Rate (Mar.) actually fell slightly from the previous month at 3.5%. The US is not the only country grappling with economic slowdown; Japan & China are struggling to keep their economies expansionary, while Germany, Eurozone, and the UK are still unable to bring their Manufacturing PMIs out of the contraction area, aka still below the benchmark level of 50. Considering the series of soft landing signs above, market participants are currently divided on the Fed Fund Rate hike calculation; where half expect a 25bps rate hike at the upcoming FOMC Meeting in May, while the other half is betting that there will be no hike. On the other hand, Fed officials still maintain a hawkish tone, especially when the potential for rising oil prices due to OPEC production cuts and declining US oil reserves add to concerns about the lingering inflationary pressures. Domestically, Indonesia’s economic outlook seems more promising as Inflation (Mar.) fell to 4.97% YoY from 5.47% the previous month; Core Inflation also tamed to below 3% (on track with the central bank’s expectation) at 2.94% YoY, successfully lower than forecast and previous period. Asian Development Bank also expects Indonesia’s economy to grow 4.8% this year, and increase to 5% in 2024. The Rupiah exchange rate has been in the spotlight recently as it reached its strongest level in 2 months at a low of IDR 14,880/USD. This is due to the support of foreign net purchases in the past week amounting to IDR 2.46 trillion, increasing the coffers of Foreign Net Buy YTD to IDR 8.72 trillion.
This week’s outlook:
This week, US Inflation (Mar.) data will be closely monitored on Wednesday with forecasts that it could ease further from 6% (Feb.) to 5.2% YoY. On the same day, the Federal Reserve will release its March meeting minutes which will give an idea of where their monetary policy is heading. Given the recent turmoil in the banking sector, investors are expecting a rate cut by the end of this year, but the Fed has said that they will keep rates high as long as necessary. Quarterly performance reports from US banking companies will also be monitored to determine their health; just in time for the Spring meeting of the World Bank & IMF which will gather central bank officials & finance ministers in Washington this Monday. The IMF will announce its latest global economic growth forecast on Tuesday, amid lingering threats of inflation & financial sector instability. Following on Wednesday, finance ministers from the G20 countries will gather. From Indonesia, no economic data to look forward to this week other than : Foreign Exchange Reserves (Mar.), Consumer Confidence Index (Mar.), and Retail Sales yoy. Overseas sentiment will definitely play a bigger role including from Asia: China Inflation & Trade Balance data (Mar.); from Europe: Eurozone Retail Sales (Feb.), UK GDP (Feb.), German Inflation (Mar.); and from the US: US Initial Jobless Claims & PPI (Mar.) which will be released on the same day next Thursday, capped by US Retail Sales (Mar.) & Michigan Consumer Sentiment & Expectation (Apr.) on Friday.
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