by Kim | Apr 28, 2025
Key events this week – US Q1 GDP, Non-farm payrolls, PCE inflation, ISM manufacturing PMI, Eurozone & Aus CPI, BoJ Meeting
Recap from last week: Global PMIs Soften as Tariff Risks Loom.
There were several unifying themes emerging from the various surveys and data last week. The S&P flash PMIs for April painted a fairly clear picture of those themes with decelerating growth momentum and firming inflation pressures, amid a backdrop of weakening business confidence weighing on the outlook. While the PMIs reflected a general weakening of growth momentum, the source and sectoral impact of this slowdown varied. US services slowed notably while manufacturing stabilized. Japan’s services sector expanded while manufacturing contracted. Eurozone manufacturing output expanded more modestly while services contracted. In the UK, weakness was prevalent across both sectors. While tariffs are a significant concern across most regions, the UK report emphasized domestic headwinds like rising staffing costs alongside weakened global demand. The PMIs highlighted that inflationary pressure continued to intensify, and tariff-related uncertainty remained a strong and consistent theme.
While the global flash PMIs offered a broad overview of decelerating growth and rising uncertainty, the US Fed Beige Book provided a more detailed view of the emerging effects of tariff uncertainty weighing on US firms. The Beige Book detailed stagnant growth, stalled hiring, and despite modest to moderate price pressures, warnings of future supplier price increases. The key takeaway was that elevated tariff uncertainty is leading to more cautious behavior by firms.
“Several Districts reported that firms were taking a wait-and-see approach to employment, pausing or slowing hiring until there is more clarity on economic conditions. In addition, there were scattered reports of firms preparing for layoffs.” Source: US Fed Beige Book, Apr 2025
For weeks, we’ve noted the divergence between solid “hard” data and worsening sentiment. However, even the “hard” US data was mixed last week. Durable goods orders were stronger due to an increase in aircraft orders, while growth in shipments was subdued. New home sales beat expectations, but growth was focused on one region (the South). Existing home sales were lower than expected. Overall, this contributed to the already negative outlook for US Q1 GDP.
Even as US Q1 GDP growth expectations edged lower, data this week emphasized that the looming tariff impact continues to paint an increasingly uncertain picture for the outlook. The unpredictable tariff landscape remains at the heart of this uncertainty, acting as a handbrake for some firms. The announcement of the 90-day pause on reciprocal tariffs and softer rhetoric last week offer little real clarity on the outlook. The conflicting signals on negotiations only amplify the sense that we remain in a holding pattern, awaiting the consequences of this trade war.
Outlook for the week ahead; US Q1 GDP, Non-farm payrolls, PCE inflation, ISM manufacturing PMI, Eurozone & Aus CPI, BoJ meeting
While the impact of tariffs on activity and inflation seems inevitable, the timing and magnitude remain uncertain. Our attention now turns to the hard data, with a significant week of US growth, inflation, and labor market data ahead of next week’s FOMC meeting. While it’s likely still too early for any notable tariff impacts to be evident in this week’s figures, those effects are likely to begin emerging in the coming weeks and months.
Key factors & events to watch this week;
US President Trump will host a rally on Tuesday (Michigan) marking his first 100 days in office. As usual, there is headline risk around this event.
US non-farm payrolls and labor market update for April
- Non-farm payrolls are expected to increase by +129k in Apr, down from +228k in Mar.
- The unemployment rate is expected to remain unchanged at 4.2% in Apr.
- Average weekly hours are expected to be unchanged at 34.2 hrs
- The JOLTS report for Mar is expected to show a fall in Job Openings to 7.48m, from 7.56m in Feb.
- The Challenger Job Cut Announcement Report for April will be closely watched after two notably weaker reports in Feb and Mar.
- The ECI for Q1 is expected to increase by +0.9%.
US GDP Growth Q1
- Early in the week, the prelim goods trade balance report for Mar will be released. This has been a key factor behind the notably weaker Q1 GDP expectations. The trade balance is expected to be little changed at -$143bn in Mar, from -$147bn in Feb.
- The advance Q1 GDP is expected to slow to +0.4% annualized in Q1, down from +2.4% in Q4 2024.
US PCE Inflation, spending, and income for Mar
- Headline PCE inflation is expected to slow to +2.3% in Mar, from +2.5% in Feb. The monthly pace of inflation is expected to be flat versus +0.33% in Feb.
- Core PCE inflation is expected to slow to +2.6% in Mar, from +2.8% in Feb. The monthly pace of core PCE inflation is expected to slow to +0.19%, from +0.37% in Feb.
- Personal spending for Mar will be important – especially given the stronger motor vehicle sales reflected in the Mar retail sales report. Personal spending is expected to increase by +0.6% in Mar, slowing from a robust +0.8% in Feb.
- Personal income is expected to slow to +0.4% in Mar, from +0.8% in Feb.
The US ISM manufacturing PMI for Apr is expected to show a further slowdown in manufacturing activity.
The BoJ meets this week and is expected to keep its policy rate unchanged. Despite the firmer signal from the Tokyo CPI last week, the BoJ is likely to remain cautious regarding the uncertain tariff outlook.
Australia’s Q1 CPI is expected to increase by +0.8% over the quarter, up from +0.2% in Q4. The annual pace is expected to slow to +2.3% from +2.4% in Q4. A further moderation in inflation in this report will be important for the RBA outlook on rates.
The prelim Eurozone CPI for Apr is also expected to show some further moderation while underlying inflation remains steady. Headline CPI is expected to slow to +2.1% in Apr, from +2.2% in Mar. Core CPI is expected to be unchanged at +2.5% in Apr.
The Canadian election will be held on 28 April.
The broader, final suite of global S&P PMIs will begin to be released this week.
This week, the US Treasury will auction and/or settle approx. $685bn in ST Bills, Notes, FRNs, TIPS, and Bonds, raising $69bn in new money.
QT this week: Approx $33.7bn of ST Bills, Notes, and Bonds will mature on the Fed balance sheet and will be reinvested. Approx $2.3bn of Notes and Bonds will mature and will be redeemed/roll off the Fed balance sheet.
The latest update of the US Treasury borrowing requirements for Q2 and Q3 (estimate) will be released this week on 28 and 30 April.
More detail (including a calendar of key data releases) is provided in the briefing document – download the pdf below:
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Mofar2016 | Apr 28, 2025
Last week, equities held near term support and rallied strongly as expected to help maintain our bullish bias for wave (c) higher. We continue to see this corrective rally as part of an ongoing sideways wave (4) triangle consolidation. Near term bulls remain in control while above last week's lows as we look for an […]
by Kim | Apr 21, 2025
Key events this week – S&P prelim PMIs for April, US Durable Goods Orders, Fed Beige Book
Recap from last week: Tariff Uncertainty Weighs on Central Bankers.
Uncertainty surrounding US tariffs looms large over global monetary policy. Speeches last week showed central bankers shifting into a somewhat reactive balancing act of monitoring data while bracing for a potential tariff-induced shock. To be fair, the ECB and BoC have now built a cushion of rate cuts. However, this environment of significant ambiguity regarding the trajectory of trade appears to be solidifying a more hesitant and data-dependent stance, particularly as central bankers remain protective of their price stability mandates in the face of the higher-than-expected tariff risks.
The ECB cut rates as expected, noting that the disinflation process remains on track and that the euro area economy has been “building up some resilience against global shocks”. While inflation has eased, the outlook is clouded by “exceptional uncertainty”. The assessment of the policy stance relative to the theoretical neutral rate was suspended, and the ECB President colorfully stated;
Our view – my view certainly – is that the neutral rate, apart from the measurement issues associated with it, is a concept that works for a shock-free world. That’s how it is described. And anybody in this room who thinks that we are in a shock-free world would, I suggest, maybe raise their hand or have their head examined. Source: ECB President Lagarde, Press Conference Q&A, 17 Apr 2025
The ECB President emphasized the importance of readiness (attentive to new developments) and agility (not rushing to a particular stance) in determining the policy stance in the short term – “and that will require a cohesive approach that will be based more than ever on the analysis of data”.
The BoC kept its policy rate unchanged after seven consecutive rate cuts as it shifted into a wait-and-see mode to assess the impacts of tariffs on inflation and the economy. The BoC did warn that while growth was starting to show signs of slowing, inflation outcomes were uncertain. The latest CPI report showed underlying inflation remained firm in Mar. Guidance remained suspended until the situation is clearer;
Faced with pervasive uncertainty, Governing Council will proceed carefully, with particular attention to the risks. That means being less forward-looking than usual until the situation is clearer. It also means we are prepared to act decisively if incoming information points clearly in one direction. Source: BoC Statement, 16 Apr 2025
In his speech last week, US Fed Chair Powell maintained that the US economy is “in a solid position” with a strong labor market. He did acknowledge that the tariffs announced to date were ”significantly larger” than anticipated and that the same is likely to be true of the economic effects. His focus on anchored inflation expectations and the risks of persistent price pressures from tariffs suggested a reluctance to ease policy soon. Overall, Powell’s speech leaned hawkish in its cautious tone and focus on inflation risks over immediate rate cuts. He stopped short of committing to tighter policy, rather, keeping options open based on incoming data.
This was in contrast to Fed Governor Waller’s speech – where both paths seemed to lead to rate cuts. He concluded that the future path of tariffs will drastically alter the economic outlook and the necessary monetary policy response. He offered two broad scenarios. Large, persistent tariffs pose a significant risk of economic slowdown and rising unemployment, potentially warranting aggressive rate cuts despite a temporary inflation spike. Smaller, diminishing tariffs would have a less severe impact, allowing for a more measured policy response. This opens the possibility of rate cuts in the latter half of the year driven by improving underlying inflation or allowing for “good news” rate cuts. The next FOMC meeting is on 6-7 May.
US economic data followed a similar theme last week, reflecting a divergence between soft and hard data. US retail sales rebounded strongly as expected, due mostly to growth in motor vehicle sales, though retail sales increased across most categories. There is uncertainty over the durability of the improvement if growth is due to a pull forward of consumption before tariffs are in effect. Housing permits increased by more than expected, however housing starts (feeds into GDP) were lower than expected. Overall industrial production declined (due to the output of utilities), but manufacturing output growth was positive for Mar, though slowed from Feb. The first two regional manufacturing surveys for Apr (soft data), reflected a further weakening in activity and sentiment. The surveys captured the initial response to the Liberation Day tariff announcement, as well as the announcement of the pause on reciprocal tariffs.
Overall, the Atlanta Fed GDP Nowcast for Q1 growth “improved” slightly last week, but remained low at -2.2% (as of 17 Apr), with the gold-adjusted forecast for Q1 growth at -0.1%.
Outlook for the week ahead; S&P prelim PMIs for April, US Durable Goods Orders, Fed Beige Book.
The data flow will be somewhat lighter this week with a focus on both hard and soft data. The news flow around tariffs and potential “trade deals” will continue to pose headline risks. The 2025 World Bank/IMF meetings will take place this week.
Key factors to watch this week;
S&P preliminary PMIs for Apr – US, Eurozone, France, Germany, Japan, and Australia
- The April preliminary PMI reports will be an important read on business activity and sentiment reaction since the US Liberation Day tariff announcement.
US data – we continue to monitor the divergence between soft and hard data. Data flow this week will be light with a few highlights. Q1 earnings reports will remain in focus.
- US Durable Goods Orders for Mar are expected to increase by +1.5% in Mar, up from +1% in Feb.
- The US Fed Beige Book for the last six weeks will be released this week – providing some important anecdotes from regional Fed contacts on activity, prices, and the labor market.
- New home sales are expected to be little changed at 0.68m (annualized) in Mar, up from 0.676m in Feb. Existing home sales are expected to slow to 4.14m in Mar, from 4.26m in Feb.
- US Q1 earnings reports will remain in focus this week; particularly regarding guidance and mentions of tariff/trade effects.
There are several Fed speeches this week including Vice Chair Jefferson and Governor Waller (though this is noted as “opening remarks”). It will be the final week of Fed speeches ahead of the black-out period next week, leading up to the next FOMC meeting on 6-7 May.
This week, the US Treasury will auction and/or settle approx. $434bn in ST Bills, with a net paydown of $61bn. The US Treasury will also auction the 2-year, 5-year, and 7-year Notes and the 2-year FRN this week. They will settle at the end of the month, together with the 20-year Bond and 5-year TIPS.
QT this week: Approx $10bn of ST Bills will mature on the Fed balance sheet and will be reinvested.
More detail (including a calendar of key data releases) is provided in the briefing document – download the pdf below:
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Mofar2016 | Apr 21, 2025
Last week, equity markets continued to trade sideways to down in what is expected to be a big picture wave (4) triangle consolidation. The latest rally is only in a corrective 3 waves up so far and while downside risks remain, bulls remain in control while key support holds. Given the ongoing uncertainty surrounding tariffs […]
by Kim | Apr 14, 2025
Key events this week – US retail sales, US Fed Chair Powell speech, BoC & ECB decisions, and global inflation data
Recap from last week: Uncertainty Continues to Cloud the Economic Horizon.
Negative market reaction to the US tariff shock of April 2nd continued to intensify last week. However, on the eve of the implementation of reciprocal tariffs, a crucial development emerged: a short reprieve from some of the harshest measures.
Just before these much harsher reciprocal levies were set to take effect, President Trump announced a 90-day pause for further negotiations. While the pause was welcomed news for the markets, the baseline 10% import tariff remains in place, though President Trump has hinted at some possible exemptions. There was no reprieve for China on reciprocal tariffs and instead, the tariff war escalated. However, the US later announced an exemption on tariffs of imports of key electronic goods, including smartphones, from China. This announcement was later walked back by President Trump saying that it would only be a short reprieve, with a new tariff rate for electronic goods to be announced this week.
The ongoing chaotic policy announcements define a core element of the ‘new normal’: elevated and destabilizing policy uncertainty. While possibly aimed at leveraging negotiations, this persistent uncertainty poses significant risks, not only for markets, but also particularly for trade, and US firms reliant on global supply chains.
The risks of this backdrop of persistent uncertainty were reflected in the FOMC minutes last week. This uncertainty is seen as having the potential to dampen consumer spending, business hiring, and investment, and generally complicate the economic outlook. The minutes noted high uncertainty “about the net effect of an array of government policies on the economic outlook was high, making it appropriate to take a cautious approach”. Uncertainty over the effects on inflation and growth stemmed mostly from a lack of clarity over details of government policy changes. The minutes noted that growth remained solid, but was potentially moderating. Inflation concerns arising from tariffs were a key theme of the minutes, and there was a consensus that high tariff rates would possibly boost inflation.
The favorable Mar US inflation data released last week might be the calm before the tariff-inflation storm. This is a point likely to be acknowledged with caution in upcoming Fed speeches this week. Both the US CPI and PPI report for Mar surprised to the downside, indicating a likely softer PCE inflation reading in a few weeks. The fall in energy prices (gasoline), slower shelter price growth (now the slowest monthly pace of this cycle), and a contribution from a slight fall in “super-core” services prices made the largest contributions to the slowdown this month. PPI inflation was also lower than expected, as food, energy, trade margins, and warehousing prices declined. The lower-than-expected PPI inflation showed little immediate reflection of the more widespread increase in input prices reported by manufacturers in recent monthly surveys.
One of the key themes we’ve been watching in the US data flow is the divergence between weakening soft data and so far, solid hard data. After the Mar employment data and wholesale trade data last week, the adjusted Atlanta Fed GDP nowcast for the Q1 growth run rate improved slightly to -0.3%. The Atlanta Fed has also now incorporated an estimate of the Q1 “real final sales to private domestic purchasers” growth (GDP excluding the external balance). This measure has been referenced by the FOMC previously and removes the current noise from the goods trade balance. It shows that domestic demand has improved through Q1 so far, and is back to +2% annualized growth, though down from the Q4 rate of +3%.
Outlook for the week ahead; US retail sales, US Fed Chair Powell speech, BoC & ECB decisions, and global inflation data.
It will be a short week ahead of the Easter break.
This week’s focus will likely remain squarely on the unfolding tariff situation and market volatility. The tariff narrative and/or market volatility may overshadow a busy week of key data releases, Fed speeches, and central bank decisions unless these releases themselves reveal a significant impact from trade tensions.
Key factors to watch this week;
One of the key themes we’ve been watching in the US data flow is the divergence between the soft and hard data. For the moment, soft data continues to weaken while hard data remains fairly solid. The data flow this week will provide both hard data inputs into the US growth outlook for Q1 and some soft survey results for Apr.
- US retail sales are expected to rebound strongly in Mar by +1.4%, from +0.2% in Feb. We’ll be watching for a ‘pull-forward’ of auto purchases ahead of tariffs. Offsetting stronger spending may be some softer gasoline sales (due to falling prices in the CPI). The retail control group is what will feed into the GDP measure and increased by +1% last month (Feb).
- US industrial production is expected to ease by -0.2% in Mar, after a stronger rebound in Feb of +0.7%.
- Building permits are expected to be little changed at 1.45m (annualized rate) while housing starts are expected to slow to 1.42m (annualized) from 1.5m in Feb.
- The first regional manufacturing surveys for Apr will be released and may provide a further view of tariff effects. The NAHB housing market sentiment survey for Apr will also be released.
- US Q1 earnings reports will be in focus over the next few weeks; particularly regarding guidance and mentions of tariff/trade effects.
US Fed speeches will be important this week given the recent market turbulence. Fed Governor Waller will give a speech on the economic outlook on Monday and US Fed Chair Powell will also give a speech on the economic outlook on Wednesday. Both speeches will be important for how they frame the latest inflation and growth data amid the tariff and trade uncertainty as well as potentially addressing developments in the US Treasury market.
There will be several important central bank decisions this week, likely with a focus on how these central banks are navigating the tariff landscape;
- The Bank of Canada is expected to keep rates unchanged. However, the decision will be important as it balances a recent weakening in labour market conditions with expectations for firmer inflation. The latest Canada CPI for Mar is due out before the BoC meeting.
- The ECB is expected to cut rates by 25bps at this meeting. With inflation easing in the latest Mar data, the ECB is likely to consider the downside risks to growth from the tariff agenda.
- The latest RBA minutes will be released this week.
Outside of the US, inflation data will be important.
- Canada CPI is expected to ease over the month but stay elevated at +0.7% in Mar, from +1.1% in Feb (the rise in Feb was due to the end of the GST break over the holiday period). Headline CPI rebounded to +2.6% in Feb and is expected to remain elevated in Mar. The BoC core inflation measures, such as the trimmed mean also firmed recently and are expected to remain at +2.9%, having slowed to +2.5% back in Sep and Dec 24.
- UK CPI is expected to edge slightly lower to +2.7% over the year in Mar, from +2.8% in Feb. Annual core CPI is expected to slow to +3.4% in Mar from +3.5% in Feb.
- Japanese CPI is expected to firm, with the BoJ core measure excluding Fresh Food increasing to +3.2% in Mar from +3% in Feb.
There will also be a full range of Chinese data for Mar out this week including trade data (export growth was stronger than expected), Q1 GDP growth, retail sales, and industrial production.
This week, the US Treasury will auction and/or settle approx. $601bn in ST Bills, Notes, and Bonds, raising $0bn in new money. The US Treasury will also auction the 5-year TIPS and 20-year Bond this week, and both will settle at the end of the month.
QT this week: Approx $33bn of ST Bills, Notes, Bonds, and TIPS will mature on the Fed balance sheet and will be reinvested. Approx $2.7bn in Notes, Bonds, and TIPS will mature and roll off the Fed balance sheet.
The US Tax Day is this week, 15 Apr 2025.
More detail (including a calendar of key data releases) is provided in the briefing document – download the pdf below:
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
