The Economic Week Ahead

Main Macro Events This Week

The pendulum has swung back wickedly to trade politics after President Trump announced tariffs on $50 bln in Chinese tech and telecom imports. In turn, the Chinese retaliated on $3 bln in largely agricultural items, but hinted at more to come, including mulling “all options” when asked about ongoing Treasury purchases. Perhaps once the full scope of our tangled economic relationship is laid bare, both sides will have a greater appreciation for its complexity and benefits, while addressing its evident shortcomings as well. Meanwhile, Trump also grudgingly signed off on a $1.3 tln budget deal, which boosted military spending among other things, but didn’t have everything on his wish list.

United States: The U.S. economic calendar will connect the dots the week after the Fed lifted theirs, starting with updates (Monday) on the Chicago Fed national activity index for February and the March Dallas Fed index. January Case Shiller home prices may slip (Tuesday) to 204.3 from 204.5, while consumer confidence is expected to hold up near 130.00 in March from 130.8 in February and the Richmond Fed index may sink to 20 in March from 28. MBA mortgage applications are due (Wednesday), followed by the advanced trade in goods deficit, seen narrowing to -$73.6 bln from -$75.3 bln. The third report on Q4 GDP may rise to 2.8% vs 2.5% (Wednesday), along with NAR pending home sales and EIA energy inventories. Initial jobless claims may dip 5k to 224k for the March 24 week (Thursday), with personal income forecast to rise 0.5% in February and spending seen +0.3% core PCE prices may remain at a lowly 1.5% y/y for the fifth consecutive time. Chicago PMI is set to rise to 62.0 in March from 61.9 (Thursday), while final Michigan sentiment may hold at 102.0 in March. U.S. Markets will be closed for Good Friday.

Canada: The highlight is January GDP (Thursday), expected to rise 0.1% after the 0.1% gain in December. The industrial product price index (Thursday) is projected to rise 0.1% in February (m/m, nsa) after a 0.3% gain in January as the dip in gasoline prices restrains growth in the index. January average weekly earnings (Wednesday) are expected to rise 0.2% (m/m, sa) after the identical 0.2% gain in December. The Bank of Canada has been of the view that some slack remains in the labour market while the economy is operating at full capacity. The CFIB’s Business Barometer survey of small and medium business sentiment for March is due Thursday. There is nothing from the Bank of Canada this week. The next event is the release of the Business Outlook Survey on April 9, followed by the rate announcement and Monetary Policy Report on April 18. Canada’s stocks and bond markets are closed for Good Friday, March 30.

Europe: Europe will start to hunker down going into the long Easter Holiday weekend, but the calendar still holds key data releases. The German HICP (Thursday) firming back to 1.6% y/y  from 1.2% y/y, while the French rate (Friday) is seen lifting to 1.5% y/y from 1.3% y/y, the Italian rate (Friday) to 0.8% y/y from 0.5%. This should leave the preliminary March Eurozone rate, due April 4, to come back to around 1.4/1.5%. This is still far below the ECB’s upper limit for price stability of 2%, but officials are more confident now that underlying inflation has turned a corner and is on the way higher.

This is partly a reflection of increasingly tight labor markets, especially in Germany, where the official jobless number (Thursday) is likely to dip by a further -15K, leaving the jobless rate at a very low 5.4%. German wage growth is indeed picking up, but the doves at the ECB argue that with more people entering the labor market, official figures underestimate the wider level of underemployment. PMIs, ZEW and Ifo surveys all declined in March and the Eurozone ESI economic confidence indicator (Tuesday) is expected to fall back to 113.4 from 114.1, thus backing the ECB’s cautious stance. Still, while there is some disagreement over the degree of slack remaining in the economy, and how urgent is the need to phase out of exceptional measures, it is still pretty clear that the ECB is preparing to end net asset purchases by the end of the year. Officials don’t seem in a hurry though to commit to such a step just yet, however, and if volatility remains high, Draghi could delay a clarification of the future of QE until July, still well ahead of the end of the current QE schedule in September.The data calendar meanwhile also includes Eurozone M3 numbers, German import price inflation and consumer confidence as well as Italian confidence data and industrial orders and finally French consumer spending numbers.

UK: The calendar brings, in chronologic order, mortgage lending data (Monday), the monthly Nationwide house price indicator and the latest CBI distributive trades survey (both Wednesday), and Gfk consumer confidence, the third and final release of Q4 GDP data, Q4 current account figures, and monthly lending data from the BoE (all on Thursday). From these, the CBI retail survey expected to show a realised sales headline of 7 in March, after 8 in the month prior, the Gfk consumer confidence to remain unchanged a -10 in March, and GDP growth to remain unrealised at 0.4% q/q and 1.4% y/y. In-line outcomes would not likely impact sterling markets much. The markets will be closed Friday through Monday for Easter.

Japan: In Japan, growth has shown signs of slowing after the better than expected Q4 GDP pace of 1.6%. And the erosion in business sentiment could portend further slippage, especially on regional trade worries as well as the firmer JPY. Additionally, the stronger yen could thwart the BoJ’s reflation attempt. This week’s data will help clarify the outlook. February services PPI (Tuesday) is expected to dip to a 0.6% y/y pace from 0.7%. February retail sales (Thursday) are seen climbing to a 1.0% y/y clip from 0.4% for large retailers, and to 2.0% y/y from 1.5% overall. Tokyo March CPI (Friday) is pencilled in at an unchanged 1.4% y/y overall, and 1.0% y/y from 0.9% on a core basis. February unemployment rate (Friday) is forecast at a steady 2.4%, while the job offers/seekers ratio likely remained steady at 1.59. February preliminary industrial production (Friday) is expected to bounce to a 6.0% y/y rate from -6.6%, though a lot of the swing could be a function of Lunar New Year distortions. February housing starts (Friday) are estimated to have improved to a -6.0% y/y pace after plunging to -13.2% previously (perhaps on poor weather). February construction orders are also due Friday.

Australia:  The data calendar has private sector credit (Thursday), expected to improve to a 5.0% y/y pace in February from 4.9% in January. The usually busy Reserve Bank of Australia has nothing on the docket this week. The next event is the April 3 board meeting, which no change to the current 1.50% rate setting is expected.

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Andria Pichidi

Market Analyst

HotForex

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