4 min read.Updated: 07 Jun 2021, 01:53 AM ISTNiti Kiran
The US inflation data and China’s foreign trade numbers will be released this week. Domestic markets will watch out for vehicle sales numbers as well as mutual funds data for May
Every Monday, Mint’s Plain Facts section features five key data releases to watch out for during the week. Vehicle sales data for May will be out this week, and will help us quantify the impact of the lockdown on the auto sector. Data on mutual fund flows will also be released. The global markets will await the inflation numbers from the US and the European Union ‘s (EU’s) monetary policy at a time when both economies are recovering rapidly.
1. Auto sales
The Society of Indian Automobile Manufacturers (Siam) will release its automobile production and sales numbers for May on Thursday. Sales had remained muted in May 2020 due to the nationwide lockdown. The numbers are set to be dismal this year, too, as the segment reels under a consumption slowdown with most states under restrictions yet again. In April, car sales had already reported a sequential decline of 10%. Two-wheeler sales were hit even more (34%).
However, a Sharekhan report expects the passenger vehicle segment—two- and four-wheelers—to remain strong even in the midst of the pandemic, as the preference for personal mobility options grows. Considering the likelihood of a normal monsoon, higher reservoir levels, and bumper kharif sowing last year, rural demand is likely to recover strongly in southern and western belts. The industry is likely to claw out of the woods later this fiscal year with pent-up demand driving growth from the September quarter.
2. Mutual fund flows
Equity mutual funds (MFs) recorded net inflows in March and April after an eight-month stretch of outflows. The quantum, however, dipped to ₹3,437 crore in April from ₹9,115 crore in March, largely due to fresh disruptions caused by the second wave of covid-19 infections. Data for May, due from the Association of Mutual Funds in India (Amfi) on Tuesday, will show which way investors’ money was headed in May.
The 30-share index Sensex had declined 1.5% in April, but was back in the positive terrain in May, recording its biggest monthly gain of 6.5% this year. Data from the Securities and Exchange Board of India suggests that investors may have taken some money off the table in May, somewhat like the outflows until February on account of profit booking.
Sentiments continued to remain buoyant as covid cases were on a decline. However, market participants will remain watchful for any short-term hiccups.
3. US inflation
The US will release its consumer price inflation data for May on Thursday. In April, retail inflation had surged to 4.2%, hitting a 13-year high and almost twice the Federal Reserve’s target. Ongoing supply disruptions and a surge in post-pandemic demand are fuelling the rapid price rise. There are other indications, too, of a strong recovery as the world’s largest economy re-opens after vaccinating a significant chunk of its population. Weekly jobless claims hit a fresh low in the week ended 22 May. The focus also shifts to a multi-trillion-dollar stimulus proposed by the Joe Biden administration in May, which could stoke underlying inflationary pressures even further. The April surge has worried investors: will the Fed act fast on its loose policy? The Fed, on its part, continues to insist that inflation is “transitory" and could return to its 2% target by 2022.
The European Central Bank’s (ECB’s) governing council meets on Thursday to review its monetary policy. Like the US, the challenge is clear: rising inflation at a time when it may be too early to withdraw stimulus.
Still, some analysts expect that a pick up in vaccination and a broadly balanced growth outlook could slow the pace of the ECB’s asset purchases programme, in place since March 2020. In its last policy meeting in April, the council had reiterated that it would continue the programme until at least March 2022, or until the covid-19 crisis seems to be over. The accommodative policy stance is intended to support 19 euro area economies in coming out of the recession. The ECB’s target is to keep inflation below 2%, but rising energy prices have pushed retail inflation beyond the comfort zone. With the ECB insisting that inflation is being driven by temporary factors, market players will keep an eye for clues on its policy directions.
5. China’s trade balance
China’s General Administration of Customs will release its foreign trade data for May on Monday. The country’s trade numbers have been surprising on the upside of late. Exports soared 32% in April against 31% year-on-year growth in March, beating market estimates. Imports grew at an even faster pace, 43%, while the trade surplus expanded from $13.6 billion in March to $42.9 billion in April. Will the numbers defy estimates again?
Experts said the re-opening of developed economies is boosting global demand. This is bolstering exports from China, while imports find support from higher commodity prices and a weak base of last year. In 2020, China’s share in global exports rose to an all-time high of nearly 15% as its outbound shipments remained resilient, shows data from the UN 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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