Bank Of Canada Lifts Rates By 50 Basis Points Again. Is an Even Steeper Increase in the Cards?

On the latest edition of Market Week in Review, Director of Investment Strategies, Shailesh Kshatriya, and Director of Institutional Investment Solutions, Greg Coffey, discussed the recent PMI (purchasing managers’ index) readings from China and the U.S. They also chatted about the latest interest-rate increase from the Bank of Canada (BoC), as well as skyrocketing inflation in the eurozone.

China PMI survey indicates slower pace of contraction

Kshatriya opened the conversation with a look at the state of U.S. manufacturing, noting that the latest manufacturing PMI reading from the Institute for Supply Management (ISM) rose to 56.1 in May—up from 55.4 in April and slightly above consensus estimates. A reading above 50 indicates an expansion in business activity, while a reading below 50 points to a contraction in business activity, he explained.

“The latest number suggests that the growth outlook for the U.S. economy remains decent,” Kshatriya remarked. He added that weekly initial jobless claims in the U.S. for the week ending May 28 fell to 200,000 from 211,000 the prior week, indicating that the labor market remains tight.

Turning to China, Kshatriya said there’s been a few recent positive developments for the world’s second-largest economy, which has struggled this year due to its zero-COVID approach and associated lockdowns in major cities. The National Bureau of Statistics’ manufacturing PMI reading increased to 49.6 in May, up from a level of 47.4 in April, which suggests that the pace of contraction in China is slowing, he remarked. In addition, Chinese policymakers recently announced several measures to boost the nation’s economy, including tax rebates, subsidies to encourage consumption and, most significantly, additional spending that targets infrastructure, Kshatriya said.