Watch US data closely for a Kumamato supply chain impact - Westpac

Robert Rennie, Research Analyst at Westpac, suggests that while the FOMC minutes have clearly highlighted risks the Fed raises rates in June, it remains data dependent.

Key Quotes

“This makes May data critical to the outcome. One factor that may influence this is how severe the hit to global supply chains from the Kumamoto earthquakes becomes. It is clearly the case that the level of damage was localised and that auto/ parts suppliers learned an important lesson from the Tohoku disaster. However, we still do expect to see an impact.

Production levels in Japan were depressed in March and the risks are we see further weakness in April’s IP and PMI readings at the end of this month. In terms of the US impact, container imports into the US were soft in April; container rates remain close to record lows; and air freight rates are softening too. Worth considering as we look forward to key data.”