It’d be too much to suggest a pivotal week looms for macro watchers, but market participants will be compelled to parse a pair of consequential releases from the US in the days ahead, as well as the nuance of a BoJ meeting.
The first read on Q1 GDP is due from the world’s largest economy, which probably expanded at a 2.7% pace last quarter, according to consensus.
I suppose this goes without saying but that’s not consistent with the Fed’s pretensions to engineering a slowdown such that growth runs at a more “sustainable” pace.
Although 2.7% would mark a material deceleration versus the back-half of 2023, it’s not indicative of an economy amenable to being “tamed,” so to speak. With apologies to glass half-empty types, recession banter’s a non sequitur in the US context. For now at least.
The personal consumption component in the GDP release is seen at 2.8%. The core price index will be eyed closely for obvious reasons. It’s seen picking up to 3.4%. Again: Talk of recession isn’t just misplaced, there isn’t even much in the way of context for it in the US.
The GDP release is Thursday. On Friday, personal income and spending figures for March, as well as that month’s PCE price data, will likely underscore the notion that the disinflation process isn’t proceeding in a way that allows for near-term rate cuts. Core PCE is seen printing 0.3% MoM for a second straight release. The print before those (i.e., January’s MoM reading) was even warmer.
The data covering March will be “in hand” by the time it’s unveiled courtesy of the GDP report the previous day, but the personal spending release still has market-moving potential. Specifically, traders will look to the PCE-derived “supercore” inflation measure to refine expectations for the May FOMC meeting.
The Fed’s in their self-imposed communications blackout ahead of the next policy gathering which is for the best, frankly. As Claudia Sahm put it recently, “Hearing from the Fed is a good thing, but too much of a good thing is not good.” That merits a chuckle.
Recent Fedspeak made clear the Committee’s reservations about cutting rates anytime soon in light of successive CPI overshoots, robust jobs creation and a spending impulse that’s arguably (and ironically in this context) being supported by the interest income windfall accruing to households with large money market fund balances.
Stocks enter the week back-footed, down more than 5% from records reached late last month. A lot hangs on big-tech earnings which’ll start to roll in over the next several days.
Other US macro releases on this week’s schedule include preliminary readings on S&P Global’s PMIs for April as well as new and pending home sales.
Elsewhere, the Bank of Japan will update its inflation forecasts on the heels of March’s watershed rate hike and European investors will eye an update on Germany’s Ifo index.
