Macroeconomics: The Day Ahead for 29 April

Data and events schedules rarely get much busier than today’s, with a deluge of statistics, plenty of central banks speakers and a plethora of corporate earnings around the world, as Japan begins what will be a very subdued run of Golden Week holidays. US Q1 advance GDP and weekly jobless claims top the run of data, though ahead of that there are German and Spanish CPI and labour data, Eurozone M3 and EC Confidence surveys, and some other Q1 GDP data in Europe (Sweden, Belgium and Latvia) ahead of the larger Eurozone countries reports tomorrow. Following on from yesterday’s FOMC meeting, there are ECB (de Guindos, Elderson and Weidman) and Fed (Quarles & Williams), and some attention also needs to be given to BoE’s Saporta speech on simplifying rules for smaller banks, as this will have a bearing on the BoE’s ability to implement negative rates. Italy holds its month end EUR 8.0 total Bln 5 & 10-yr BTP and CCT auctions, while in the commodity space there are S&D reports from the International Grains and World Gold Councils. The corporate earnings schedule has numerous energy and metals producers (Petrochina, Shell, Total, Newmont, Orsted, Repsol, US Steel, Cia de Minas Buenaventura and AGM for Glencore), and among the other likely highlights are: numerous UK & European banks; Altria, Amazon, Caterpillar, Kraft Heinz, Mastercard, McDonald’s, Molson Coors, Twitter and Western Digital. Month end also looms, and tonight also sees the latest NBS PMIs in China. Yesterday’s Fed meeting and press conference offered no surprises, with Powell again emphasizing that now was not the time for even discussing tapering, though if the commodity and energy price pressures persist, and the labour market continues to improve as is very likely in the period up until the Fed’s mid-June meeting, market pressure on the Fed will surely increase. As for Biden’s speech to Congress on his American Jobs and Families plans, the key issue as noted yesterday is what the watered down versions will look like, given that the partisan divide in Congress remains all too clear, and both parties themselves are divided.

** Germany / Spain – April CPI **

Inflation data for the Eurozone is projected to rise 0.5% m/m to push the y/y rate up to 1.6% from 1.3%, but with core CPI seen at 0.8% y/y from 0.9%, this would be scored as a short-term boost for the doves on the ECB’s divided council. Germany’s CPI is projected to rise 0.5% m/m to push the y/y rate up to 1.9% from 1.7%, with the heavily weighted NRW state CPI posting a slightly higher than expected 0.6%, with particular strength seen in Entertainment/Leisure (3.2% m/m) along with Food (1.2%) and Transport (0.6%), suggesting some upside risks on both headline and core CPI, also suggested by higher than expected Spanish CPI and HICP readings.

** U.S.A. – Q1 advance GDP, Initial Claims **

As noted in the week ahead the swathe of provisional Q1 GDP estimates will doubtless offer the odd surprise outlier as has been the case over the past year, but to a large extent will be seen as largely discounted and historical given monthly indicator flows, and also unlikely to shift central bank policies in the near term, despite the ‘outcome based’ narrative on policy guidance. The US is expected to reap the benefits of stimulus cheques and other fiscal spending measures, with a 6.5% SAAR (i.e. 1.6% q/q in European / Asian terms), but in contrast to Q4, Personal Consumption will be the key driver at 10.5% SAAR vs. Q4 2.3%, while supply chain bottlenecks are expected to see Inventories deduct around 1.5-2.0 ppts from headline, with a much more modest contribution from residential investment after the H2 surge. Yesterday’s advance Goods Trade Balance confirms that Net Exports will exercise a substantial drag on Q1 GDP, the question is how much of an offset there will be from inventory accumulation, which may be the biggest wild card, particularly given well documented supply chain bottlenecks, especially in the auto sector. Weekly jobless claims have seen a sharp improvement over the month, with a more modest drop to 540K vs. 546K expected, which would bring the cumulative drop for April to 202K, the best since last July, with Continued Claims seen posting a further fall to 3.590 Mln from 3.674 Mln, though broader measures of those claiming benefits will underline the continued labour market slack that the Fed underlined, while acknowledging the underlying improvement.