Whatever void is left by the absence of Fed banter in the new week will be filled by a veritable deluge of relevant data in the US.
The marquee event is obviously the advance read on first quarter GDP, due Thursday.
Consensus is looking for a sharp slowdown to a 1% annualized pace (figure below). An in-line print accompanied by any kind of disappointment on the personal consumption front would underscore concerns about Fed tightening into a consumer slowdown.
Economists expect 3.4% from the personal consumption print. That needs to hold up.
It’d be tempting to suggest March’s personal income and spending data (due the following day) will be “stale” considering traders will have GDP “in hand,” so to speak. But that’s probably not accurate. Markets are keen on any incremental clues about the extent to which inflation is impacting consumer psychology, so March’s income and outlays numbers will be instructive, especially to the extent the spending data contextualizes nominally resilient retail sales numbers.
In addition to gauging the health of the consumer, core PCE will be scrutinized for evidence to bolster “peak inflation” narratives, which garnered some support from March’s cooler-than-expected core CPI print (figure below).
Do note that Q1 ECI data is due on Friday as well. Traders (carbon-based and otherwise) will be compelled to parse March PCE and the wage data simultaneously — they’re released at the same time.
ECI carries weight at the Fed. Jerome Powell cited the series in December during a dramatized retelling of the moment he changed his mind about the proper course of policy in the face of acute price pressures.
The last read on headline ECI (for Q4) came in below consensus, even as the index remained extremely elevated. Economists are looking for another very high reading (figure below).
Recall that despite Q4’s cooler-than-expected QoQ headline print, compensation costs rose 4% YoY, while wages and salaries jumped 4.5% for the 12 months ended December. For private industry workers, the figures were 4.4% and 5%, respectively. Those were the highest readings in history. A hotter-than-expected read on the headline gauge would likely exacerbate bearish price action in rates.
In addition to GDP, inflation, spending and wage data, US traders will watch for any signs of convergence between the Conference Board’s confidence gauge (Tuesday) and University of Michigan Sentiment, the final read on which is due Friday. The preliminary print on the Michigan survey was actually better than expected for April, but the headline index is still loitering near decade lows. The glaring divergence with the Conference Board survey can be a bad omen for the economy.
Also on deck: Home prices, new home sales and pending home sales. Mortgage rates hit 5.11% last week, the highest since 2009.
