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
