The Economic Week Ahead

Main Macro Events This Week

Despite a lot of zigs and zags in global equities in recent weeks, the markets are solidly in the green for May, as well as over the last six months. Supporting the gains have been real improvement in most key economies, and hopes for accelerating growth over 2H. Curiously, most longer dated sovereign bonds have rallied too, supported in part by ongoing central bank accommodation and now safe haven and month-end flows.

United States: The U.S. calendar reboots on Tuesday after the long Memorial Day weekend with a variety of data on tap and all roads leading to the May payrolls report, which could have a profound impact on the Fed’s immediate outlook for another “gradual” rate hike in June that has been largely (80%) priced in. April nonfarm payrolls (Friday) are expected to increase by 182k, with a 98k private payroll gain, which would keep the policy trajectory on track. The unemployment rate is expected to hold steady from 4.4% last month and the workweek is expected to hold at 34.4 for a third month. Initial claims should average 243k in April from 251k in March. Ahead of the payrolls release April personal income (Tuesday) is forecast to rise 0.4%, while spending is seen up 0.6% and core PCE prices are set to rise just 0.2%. MBA mortgage market report (Wednesday) will be accompanied by May Chicago PMI, seen slipping to 57.5 from 58.3, along with April NAR pending home sales steady at 111.4. Data really gets crammed (Thursday) after the holiday break, as the ADP employment survey is set to rise 190k in May from 177k. Also on tap (Thursday) are no less than productivity, initial jobless claims, construction spending, ISM, auto sales and EIA energy inventories. The week rounds out with the full trade report (Friday) after the payrolls report.

Canada: Canada’s economic calendar is packed with data this week. The Q1 GDP and March GDP reports (both Wednesday) highlight, while April trade (Friday) will also be on considerable interest. The trade balance (Friday) is seen improving to a C$0.1 bln surplus from the -C$0.1 bln deficit in March. Labor productivity (Friday) is expected to expand 1.1% in Q1 (q/q, sa) after the 0.4% gain in Q4. The IPPI (Tuesday) is projected to surge 1.0% m/m in April following the 0.8% rise in March. The current account deficit (Tuesday) is anticipated to worsen to -C$11.5 bln in Q1 from -C$10.7 bln in Q4. The May Markit manufacturing PMI is due Thursday. Dealer reported vehicle sales are anticipated Thursday or Friday. There is nothing from the Bank of Canada this week, with the next event the release of the Financial System Review on June 8th.

Europe: The battles for direction at the ECB seem to be in full swing even ahead of the June 8 council meeting and after Coeure suggested that gradualism is falling out of favor even at the Executive Board. The heavy weights Draghi and Praet hit back last week, stressing that inflation is still not on a sustainable path toward the target. So, this month’s solid round of confidence data, which will be rounded off by the ESI sentiment indicator on Tuesday, may confirm that the recovery continues to strengthen and broaden. A slight improvement in the ESI is expected, which would leave the May round of confidence data again confirming that growth continues to strengthen. PMIs also suggest that the companies are taking on more staff and with German Ifo readings jumping higher this month, the German jobless number expected to decline a further -15K, in May which would leave the jobless rate at the record low of 5.8%. The April Eurozone unemployment rate meanwhile is seen falling to 9.4%. Eurozone inflation numbers are expected to fall back in May, after the Easter fueled jump in April. A German headline rate (Tuesday) of 1.7% y/y down from 2.0% y/y in the previous month, while overall Eurozone HICP (Wednesday) is seen falling to 1.5% y/y from 1.9% y/y, arguably below the ECB’s definition of price stability as below but close to 2%. Data releases also include Eurozone M3, German retail sales and French consumer confidence, Italian HICP, as well as German import price inflation and French and Eurozone PPI readings.

UK: London markets are closed today for a UK public holiday. The calendar thereafter brings April lending data from the BoE (Wednesday) and the first two of the three PMI surveys for May, with manufacturing (Thursday) and construction (Friday), which are due ahead of the services report (due out the following Monday). The lending data has us expecting a GBP 1.5 bln tally for net consumer credit, which would be near underlying trend.

Japan: In Japan, things kick off on Tuesday with April unemployment, where the jobless rate is seen steady at 2.8%. The job offers/seekers ratio likely held steady at 1.45. April personal income and PCE are due Tuesday. April retail sales (Tuesday) should be flat versus -0.8% y/y for large retailers, and slow modestly to a 2.0% y/y clip from up 2.1% overall. April industrial production (Wednesday) is penciled in accelerating to a 3.0% y/y rate from 1.9% previously. April housing starts and construction orders are also due Wednesday, with the former seen dropping to a 1.0% y/y pace of contraction from the previous 0.2% rate. The May Nikkei/Markit manufacturing PMI (Thursday) is expected steady at 52.7. April auto sales are due Thursday.

Australia: Australia’s calendar features private capital expenditures (Thursday), expected to rebound 1.0% in Q1 (q/q, sa) after the 2.1% tumble in Q4. Retail sales (Thursday) are seen recovering 0.1% m/m in April after the 0.1% dip in March. Building approvals (Tuesday) are projected to bounce 5.0% m/m in April after the 13.4% plunge in March. The Reserve Bank of Australia is silent this week. The next event is the Reserve Bank Board Meeting on June 6.

New Zealand: New Zealand’s calendar has April building permits (Tuesday) and the Q1 terms of trade (Thursday). But the main event this week is the release of the Reserve Bank of New Zealand’s Financial Stability Report.

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Andria Pichidi

Market Analyst


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