Macroeconomics: The Day Ahead for 30 April

Today is another one of those days with a very plentiful statistical agenda that may fall on the deaf ears of month end flows, the latter above all exacerbated by central bank ‘largesse to excess’ and its risk devouring twin, financial repression. Be that as it may, there is much to digest from the overnight session: China’s April PMIs (mixed with NBS measures falling, but Caixin Manufacturing rebounding), Production data from Japan & South Korea, Tokyo CPI (dragged down by mobile phone charges) and Japanese Unemployment. Eurozone and national Q1 GDP and CPI readings dominate the schedule, with GDP data also due from Canada (Feb) and Mexico (Q1), and the US has Personal Income/PCE (largely pre-empted by yesterday’s Q1 GDP), Chicago PMI and final Michigan Confidence. With oil prices seemingly set to break out of a tight recent range (see chart), the EIA’s monthly Petroleum & 914 Crude Production reports will get plenty of attention. Another relatively busy day for corporate earnings has a further slew of UK and European bank earnings, with Mitsui & Co, AstraZeneca, Chevron, Colgate-Palmolive, Exxon Mobil, LyondellBasell Industries and Phillips 66 also likely to be among the highlights. Next week will see some holiday disruptions (Japan Golden week through Wednesday, UK May Bank holiday), but otherwise offer the usual start of month run of PMIs and US labour report to end the week statistically, accompanied by RBA (Tuesday) and BoE (Thursday) policy meetings, with the latter perhaps seeing the BoE as the G10 central bank that follows the BoC in adopting a less accommodative stance, with monthly QE purchase volumes expected to be reduced.

** Eurozone – April CPI / Q1 GDP **

Upside surprises were the order of the day yesterday both on CPI and Q1 GDP, with both Germany and Spain above forecast on CPI, with Entertainment & Leisure giving a boost (in part Easter related) in addition to Food and Transport, and by extension imparting upside risks for the Eurozone readings today. That said, the upside miss is relative to forecasts of 1.5% y/y headline and 0.8% y/y core, and hardly signal inflationary pressures, above all given that some of the upward pressure (above all energy) is base effects, which will be transitory as the ECB has emphasized. Following on from the better than expected 0.6% q/q in Belgium (vs forecast flat), and more obliquely the solid beat in Sweden (1.1% q/q vs. 0.5%), and the on balance better than expected (but again divergent) outturns in Germany and France, Eurozone GDP looks likely to beat the estimate of -0.8% q/q -2.0% y/y, but still confirm a double dip. The details are however important, and will highlight one major difference with the US, domestic demand remains weak (notwithstanding the French rise), and by contrast US final Sales to Domestic Buyers stood at 9.8% SAAR (i.e. 2.5% q/q in European terms), even if much of the boost in the US can be attributed to govt stimulus cheques. The fact remains that the still unratified EU Recovery Plan is now so desperately needed to ensure that whatever ‘pent-up demand’ there might be as lockdown restrictions start to ease in the month does not fizzle out later in the summer, thus leaving domestic demand mired in stagnation.