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Macroeconomics: The Day Ahead for 16 May

Limited update today due to conference commitment.

EVENTS PREVIEW

What is a very busy week for major data reaches its zenith today, with the overnight run of China Retail Sales, Industrial Production, FAI and Property sector indicators and the UK March/April labour market report to digest. Ahead lies Germany’s ZEW survey, Eurozone revised Q1 GDP, Canada CPI, and US Retail Sales, Industrial Production, Business Inventories and NAHB Housing Market Index, with an array of central European national Q1 GDP also worthy of some attention. There are the May RBA minutes to digest ahead of another raft of ECB and Fed speakers, while the IEA publishes its monthly Oil Market Report, with a number of major commodity conferences also getting underway. Govt bond sales take form of the UK selling a new 2063 Gilt via syndication, while Finland sells 15-yr. Baidu, Bharti Airtel, Buoygues, Home Depot and Vodafone will be among the headline makers in terms of corporate earnings reports.

** U.K. – March / April labour market reports **

While Average Weekly Earnings will be market sensitive, today’s report is unlikely to be a game changer. April HMRC Payrolls are seen posting another modest rise of 25K, and contrasting with a robust 160K rise in Jan-March LFS Employment, while ex-bonus Earnings are forecast to post a fresh 2-yr high at 6.8% y/y, despite a marginally benign base effect. For all that many are highlighting the drop in Vacancies as signalling some loosening in the labour market, a cursory look at the attached chart underlines that Vacancies at 1.105 Mln remain 240K above the pre-Covid peak, and way above the 2010-29 average of 722K.

UK Job Vacancies chart

** U.S.A. – Retail Sales, Industrial Production & NAHB Housing Market Index **

As noted in the week ahead, this week’s US data run is likely to keep the Fed wary about the inflation outlook, and will likely serve as a reminder to markets pricing a very sharp Fed pivot in H2 2023 that what is being priced in will likely only materialize in the case of a quite possible credit market meltdown, or a less likely US debt default, which credit spreads and equity market valuations are definitely not discounting… as the saying goes ‘caveat emptor’. Be that as it may, headline Retail Sales are seen reversing all of the revised -0.6% m/m drop with a bounce of 0.8% thanks to the jump in Auto Sales, and to a much lesser extent higher gasoline prices. Core measures are also seen rebounding, if less vigorously: ex Autos & Gas 0.2% m/m vs. -0.3%, Control Group 0.3% m/m vs. -0.3%, with tepid Redbook readings suggesting sluggish goods spending. Industrial Production is expected to be flat m/m, with the uptick in sector PMIs seen helping Manufacturing Output to eke out a marginal gain (0.1% m/m) after March dropped -0.5% m/m, higher auto output may give a boost. The NAHB Housing Market is seen unchanged at 45, with the continued scarcity of Existing Home Sales translating into stronger demand for New Home Sales, above all in the multi-family sector, even though high mortgage rates and affordability remain significant headwinds, and leave the index at overall weak levels historically.

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