It was a little over eight years ago when then Fed chief Bernanke said he saw signs of “green shoots” of recovery from the Great Recession and financial crisis of 2007-2008. But they didn’t really blossom as annual GDP growth has averaged only 2.1% in the U.S., and even less in OECD countries. Despite the fears that the political tumult since Brexit would be a major headwind to growth, recent data reveal an increasingly upbeat outlook, where the rise in optimism finally could be bearing fruit
United States: Trading in the U.S. was choppy last week as political uncertainties dominated. This week, the markets will be closely following President Trump’s first overseas trip as leader of the free world as he visits Saudi Arabia, Israel, Italy (for a G7 summit), the Vatican, and Belgium (for a NATO summit). Despite political uncertainties, we have some US data out this week. The data calendar is light and none of the releases will be really crucial to the outlook. The week’s highlights are home sales and home prices, durable goods, consumer sentiment, and the second look at Q1 GDP. New home sales (Tuesday) are expected to drop 4.2% in April to a 595k unit pace. Sales have been up all year so far. April existing home sales (Wednesday) are projected to fall 0.5% to a 5.680 mln clip. Durable orders (Friday) are seen dropping 1.0%, erasing the 0.9% March increase, and ending a string of three straight monthly gains. The final reading on May consumer confidence from the University of Michigan survey (Friday) is seen unchanged at 97.7. Q1 GDP (Friday) is expected to be revised down to a 0.5% rate of growth from the 0.7% Advance report. Other data this week includes April Chicago Fed national activity index for April (Monday), the Richmond Fed index (Tuesday), the flash May Markit PMI (Wednesday), the FHFA home price index (Wednesday), the KC Fed manufacturing index (Thursday), the advance economic indicators (Thursday), jobless claims (Thursday), and the flash May Markit services index.
Canada: Canada’s markets are closed Monday for the Victoria Day holiday. The Bank of Canada’s rate announcement (Wednesday) is the main event this week. No change in the 0.50% rate setting expected, alongside a maintenance of a cautiously constructive outlook on growth and inflation that is consistent with no change in rates until next year. Wholesale shipments (Tuesday) are projected to improve 1.0% in March after the 0.2% dip in February. Average weekly earnings for March and the May CFIB small and medium business sentiment survey are both due Thursday. BoC Deputy Governor Sylvain Leduc speaks on Thursday, with the remarks published on the BoC’s website at 11:45 ET
Europe: That there are diverging opinions on the ECB’s Governing Council is nothing new. But so far at least the Executive Board has been united in its defense of the central bank’s still very accommodative policy and the insurance policy that the implicit easing bias still provides. However, with confidence indicators showing a more robust economy, labor markets improving, and political risks receding, it seems the discussion about how much gradualism will be needed for the ECB’s path to exit steps has reached the Executive Board. Praet and Coeure as well as ECB President Draghi are all scheduled to speak during the week and it will be interesting to see whether the two “opponents” will continue their public voicing of opinion and if Draghi will take sides ahead of the June meeting. What is clear is that the discussion is ongoing and political events and market volatility will likely be equally important in the end as confidence data and against that background this week’s round of German Ifo and PMI readings (both Tuesday) will be watched carefully. The manufacturing PMI seen at 56.6 slightly down from the 56.7 in the previous month and the services PMI at 56.5 down from 56.4 in April. The German Ifo Business Climate, meanwhile is expected to nudge slightly higher to 113.1 from 112.9, with both expectations and current conditions indicators likely to improve.
UK: Incoming data for April and May have been consistent with growth rebounding from a weak patch in Q1, highlighting that Brexit uncertainties haven’t been taking the economic toll feared. The calendar this week brings government borrowing for April (Tuesday), the May edition of the CBI distributive sales survey (also Tuesday), and the second estimate of the Q1 GDP report. The headline realized sales reading of the CBI survey expected to dip to 32 from 44 in the previous month. The GDP data expected to come in unrevised at 0.3% q/q and 2.1% y/y.
Japan: In Japan, the March all-industry index (Tuesday) is forecast at -0.7% m/m, reversing the 0.7% rise in February. CPI figures (Thursday) should show national prices at a 0.2% y/y rate overall in April, unchanged from March, while core prices should be steady at 0.2% y/y versus February. May Tokyo CPI is expected to drop to a -0.1% y/y clip overall, and -0.1% y/y core, both unchanged compared to April. April services PPI (Thursday) are estimated rising at a 0.8% y/y pace, unchanged from March.
Australia: Australia’s calendar is thin this week, with Q1 construction work done (Wednesday) one of the few economic report due. Reserve Bank of Australia Deputy Governor Debelle has a busy week. He presents a speech titled ” How I Learned to Stop Worrying and Love the Basis” at the BIS Symposium: CIP – RIP? on Tuesday. Debelle delivers opening remarks and participates in a panel at the Launch of the FX Global Code in London (Thursday). The RBA’s Head of Payments Policy participates in a panel at the Australian Retail Banking Summit (Friday).
New Zealand: New Zealand’s calendar has the April trade report (Wednesday), expected to reveal a narrowing in the surplus to NZ$250 mln from NZ$332 mln in March. Reserve Bank of New Zealand Governor Wheeler speaks in Hamilton (Wednesday) but the event is not public.
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