Canadian GDP stagnates; German inflation eases; Japanese confidence rises

Canadian GDP stagnates in Q1 and contracts annually According to data released by Statistics Canada, the gross domestic product growth rate remained unchanged in the first quarter of 2026, translating into an annualized growth contraction of 0.1%. This contraction came in considerably below analysts’ expectations, who had anticipated an annualised acceleration of 1.5%, and represents the first such economic decline since the fourth quarter of 2020. Analysis by Trading Economics and Reuters indicate that the most significant contractions occurred in capital investment, which fell by 0.7%, and government expenditure, which dropped by 0.2%. Furthermore, exports decreased by 0.1% whilst imports rose by 2.9%, thereby widening the commercial trade deficit. Conversely, household consumption expenditure advanced by 0.2%. Following the economic release, the Canadian dollar depreciated marginally against the US dollar by 0.07%, trading at 1.3793. German inflation decelerates below forecasts According to data from the Federal Statistical Office of Germany (Destatis), the annual inflation rate decelerated from 2.9% in April to 2.6% in May, delivering a notable surprise against market expectations, which had anticipated prices to remain unchanged. The report signals that the headline inflation decline was primarily driven by an easing of energy inflation, which fell from 10.1% in April to 6.6% in May, resulting from fuel tax relief implemented by the German government to mitigate rising energy costs. Nevertheless, the core inflation rate—which strips out highly volatile components such as energy and unprocessed food—exhibited an acceleration from 2.3% to 2.5%. Economists warn that energy price pressures could exert indirect, pass-through pressure on non-energy-linked products, though they note that it is premature to draw concrete conclusions since explicit evidence of this inference has yet to materialize. Regarding the market reaction, the DAX 40 index recorded a marginal appreciation of 0.05% to close at 25,104 points, whilst the euro gained 0.06% against the US dollar to trade at $1.1657. Japanese consumer confidence, industrial production, and retail sales surpass analysts’ expectations According to data from Japan's Ministry of Economy, Trade and Industry (METI), retail sales accelerated from 1.4% in March to 2.1% in April on a year-on-year basis, printing well above the market forecast of a 1.3% increase. Turnaround monthly performance exhibited a MoM advance of 1.3%, suggesting robust resilience in Japanese retail consumption. Additionally, METI revealed that industrial production expanded by 0.8% in April on a monthly basis, comfortably beating analysts' expectations of a 0.9% contraction. Consequently, the year-on-year industrial performance showed an increase of 2.3%, slightly below the previous reading of 2.4%. Concurrently, the Cabinet Office of Japan reported that consumer confidence improved markedly in its latest assessment, rising from 32.2 points in April to 33.6 points in May, outperforming the market consensus estimate of a slight dip to 32.0. An analysis by Trading Economics indicates that Japanese consumer sentiment improved across all major sub-indices: overall livelihood, income growth, employment prospects, and the willingness to purchase durable goods. Given the overarching strength and resilience demonstrated by the Japanese macroeconomic releases, the Nikkei 225 equity index surged by 2.53% to settle at 26,329 points, marking a new record high. Meanwhile, the Japanese yen closed with a marginal appreciation of 0.04%, trading at ¥159.25 against the US dollar.