The focus this week will be on the FOMC minutes, US housing data, and the global prelim PMI’s for May.
The upside surprise for US CPI in Apr dominated the news last week. Other data was generally in line with expectations, although PPI growth also came in higher. US retail sales “disappointed” with a 0% change after a 10% increase in the prior month. Of interest was the University of Michigan consumer sentiment result – consumer sentiment fell unexpectedly by 6pts (despite record stimulus, etc.). The fall was the result of higher inflation expectations and expectations for real income growth the weakest in five years. Despite negative mentions of buying conditions (for homes, vehicles, durables), the expectation is for spending to still advance – supported by rising employment/re-opening, stimulus, and savings. The rationale is interesting:
This combination of persistent demand in the face of rising prices creates the potential for an inflationary psychology, fostering buy-in-advance rationales and cost-of-living increases in wages. At present, these rationales remain relatively uncommon, and the power of corrective economic policies is now relatively potent.
Policy commitments to establish full employment while allowing inflation to meaningfully rise have never been attempted with the additional micro goals of equity and fairness across population subgroups. http://www.sca.isr.umich.edu/
This week in the US, the FOMC minutes will be released. There will also be several Federal Reserve Governors speaking during the week, including US Fed Vice Chair Clarida. Housing data will be in focus with permits (exp 1.77m SAAR), starts (exp 1.71m), and existing home sales (exp 6.09m) for Apr.
The prelim global PMI’s for May will also be released later in the week for the US, Europe, Japan, UK, and Australia. Input price pressures and supply chain disruptions will be of interest.
In Australia, the RBA will also release the latest minutes. Also out this week will be the Q1 wage price index (exp +0.5%), and the labour market survey for Apr (employment growth exp +15k). The Apr labour market survey will be the first since the end of a major business support program – the JobKeeper subsidy.
This week, the US Treasury will settle $426bn in ST Bills, Notes, and Bonds, raising approx. $37bn in new money. The net new cash raised for the quarter to date is approx. $34bn.
This week, approx. $24bn in ST Bills will mature on the Fed balance sheet and will be rolled over.
More detail (including a calendar of key data releases) is provided in the briefing document – download the file here;
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
