Data from last week highlighted slower growth in Q1 across US, Europe, Canada; PMI’s improving in the US but the “soft patch” likely persisting in Europe; CPI’s higher impacted by energy costs.
US – GDP growth remains steady, though lower than recent growth, stronger employment growth than recent average, signs of continued wage growth and inflation remains close to the Fed’s target. PMI’s and regional surveys starting to post improvements after weakness earlier in the year, suggesting further growth. Trade/tariffs: uncertainty impacting sentiment and input prices – regional survey anecdotes, impact already seen in higher input prices, some supply issues emerging.
Europe – CPI growth higher but driven by a continued acceleration in energy prices, manufacturing PMI suggesting soft patch is persisting. Stronger retail growth in Germany, slowing Q1 GDP growth in France.
Canada – GDP growth slowing in Q1, rates on hold, BoC watching for impact on households and the housing market from higher mortgage rates and tighter lending.
Japan and China PMI’s – expansion in overall manufacturing activity remains mostly unchanged, no sign of an acceleration higher.
Several speeches from US Fed Governors during last week were of interest: –
Brainard: yield curve inversion less of a signal than in the past (Fed keeping rates low), curve movements to be interpreted within context of financial conditions. Yet Bullard’s speech earlier in the week highlighted the risk of allowing the yield curve to invert.
Bostic & Brainard: US treasury fiscal spending likely to impact short-medium term outlook for the economy, risks are to the upside for now, possible case for further rate increases. Not clear that fiscal spend and tax reform (the details yet to be written) will move the economy to a different, higher sustained level of output ie improve productivity. Both Bostic & Brainard see likelihood that positive impacts of fiscal spend will fade over the medium term.
For all the detail, download the full review (then hit the ‘back’ button to return to this post):
Looking forward to this week, trade will be a key theme: –
- Trade:
- Further developments regarding the imposition of tariffs and retaliatory measures among NAFTA/European countries
- Outcomes from latest negotiations with China likely to drive sentiment
- G7 summit 8-9 June
- US, Chinese & German international trade data
- US liquidity: a lighter week with treasury bill auctions, but heavier supply next week approx. $39b in new money to be raised next week (amts TBC via Treasury announcements). No scheduled Fed speeches this week but with FOMC on board next week 13 June, expect some Fed speak
- Australia – RBA rates decision and Q1 GDP
- European growth – Q1 GDP (revised), ECB Draghi speech on Tuesday
- UK – Services PMI and Like for like Retail Sales, plus Monetary Policy Committee Member speeches all week
Download the full calendar for this week (then hit the ‘back’ button to return to this post):
Feedback is welcome. Please send any comments or questions to kim.mofardin@marscapitalpartners.net.
