US Economy shows renewed weakness GDP expanded at a 2.5 percent annual rate, after growth nearly stalled in the fourth quarter. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose at a 3.2 percent pace - the fastest since the fourth quarter of 2010. Government spending has already been on a downward path contracted at a 4.1 percent pace as defense outlays dropped sharply for a second straight quarter. A 2 percent payroll tax cut expired at the start of the year and the budget sequester with $85 billion in mandatory spending cuts took effect at the beginning of March. Construction spending dropped to a seven-month low in March as public outlays recorded their largest drop since 2006, which could cause the first-quarter economic growth estimate to be trimmed. ISM survey shows that its index of manufacturing activity slipped to 50.7, down from 51.3 in March and the slowest pace this year. U.S. companies added just 119,000 jobs in April, the fewest in seven months according to a report by ADP. The Treasury Department says it could begin decreasing the size of some of its debt auctions in coming months based on an improving deficit situation that will allow it to pay back some of the national debt this quarter. Treasury said for the current April-June quarter it plans to pay down $35 billion of the national debt, the first time it has reduced the debt in six years.

Weakness in Eurozone The Markit PMI recorded 46.5 in April, indicating a drop in activity across the eurozone for the 19th time in the past 20 months, with both manufacturing and service output declining sharply. The data revealed that Germany, widely regarded as the most fiscally secure of the member states, was at risk of contagion from the struggling eurozone core, after it saw rates of business activity suffer the sharpest drop in six months. Meanwhile, France, which has one of the highest debt-to-GDP ratios in the region, saw its decline in business activity ease for the first time in four months.

UK shows signs of recovery  The UK avoided slipping into triple-dip recession as GDP rose 0.3 per cent (qoq), during the first quarter of 2013, following a contraction of 0.3 per cent in the fourth quarter of 2012. The higher than expected growth in output was driven by the service sector, which accounts for a large portion of the UK economy, together with a rebound in mining. The construction sector, long a weak spot in the UK economy, continued to weigh on growth. The Markit/CIPS Manufacturing Purchasing Managers' Index rose to 49.8 in April from an upwardly revised 48.6 in March, putting the sector within a whisker of the 50 line that separates growth from contraction. The housing market also showed signs of resilience; house prices inched down 0.1 percent in April from March, but rose 0.9 percent compared with a year ago, the best growth in 14 months, data from mortgage lender Nationwide showed.

QQME improves economic prospects for Japan CPI inflation remained in negative territory at the start of 2013, with the annual pace of decline accelerating to -0.5 per cent in March. However, prices rose on a month-ago basis and the forward-looking numbers improved, suggesting that March was probably the bottom of the deflationary cycle for the CPI series. In its latest monetary policy meeting in early-April 2013, the Bank of Japan announced the  introduction of “Quantitative and Qualitative Monetary Easing”, with the aim of achieving the price stability target of a 2 per cent (yoy) rate of change in the CPI at the earliest possible time, with a time horizon of about two years. In order to raise inflation expectations by boosting asset prices, the BOJ will massively increase its holdings of Japanese Government bonds (JGB) and other securities. Correspondingly, the BOJ decided to switch the operation target from the overnight call rate to the monetary base, which the BOJ plans to double by the end of 2014. Most recent economic data releases, seem to point to a gradual pick-up in growth in Japan over 2013.