THE WEEK AHEAD

Focus on IPI data

THIS holiday-shortened week will see the release of Malaysia’s industrial production index (IPI) and manufacturing sales data for April 2020 on Thursday.

Malaysia’s IPI declined 4.9% in March as compared to the same month last year.

This decline represents the steepest drop in the country’s factory output since May 2011.

Over the first three months of 2020, Malaysia’s industrial production grew just 0.4% as compared to the first quarter last year.

Separately, manufacturing sales shrank 3% to Rm110.2bil in March 2020 as compared with Rm113.5bil in the same period last year.

Spotlight on Fed

A key event this week will be the latest Federal Open Market Committee (FOMC) meeting.

The upcoming meeting will also see the publication of economic projections, the first since the pandemic escalated in March, as ongoing difficulties in the labour market and soaring unemployment numbers weigh further on the weak economic performance.

Economists do not expect any major changes given that it has stated that negative interest rates are not on the cards.

IHS Markit said the upcoming FOMC meeting is expected to bring little change to the policy rate, as the Fed continues to utilise unprecedented measures introduced throughout the crisis.

The US is also expected to announce its inflation data on Wednesday.

Data week in China

CHINA’S May trade data, inflation and monetary indicators are scheduled to be released this week.

According to ING economist Prakash Sakpal, data should indicate that Asia’s biggest economy is on the recovery path, thanks to stimulus policies. However, the recovery remains at the mercy of global demand that’s currently getting a pretty strong beating from the Covid-19 pandemic.

Prakash said this imparts a downside risk to the house forecast of only a modest dip in Chinese exports in May, by -1.7% year-onyear.

China’s May foreign reserves are expected to rise slightly to US$3.095 trillion from US$3.091 trillion in April.

UK April GDP

HAVING seen large contractions in economic activity in other European countries it seems unlikely that the UK economy will be able to avoid a contraction.

IHS Markit said monthly GDP data for April will provide with insight into the economic impact of the lockdown when measures were at their most stringent.

The research house said month-on-month impact is likely to be huge, although the hope is that April will have been the worst of the downturn following signs in the May PMI survey that the pace of decline has eased.

IHS Markit forecasts a quarterly contraction in the region of 15% for the second quarter.