The key events for the w/c 6 April 2026: US inflation (PCE Feb, CPI Mar), ISM Services PMI, FOMC Minutes, RBNZ Meeting
Macro Recap: Testing the Resilience of the US Economy
The geopolitical conflict and uncertainty involving Iran continues to anchor market sentiment, though the nature of the uncertainty is evolving. Beneath the surface of the daily noise, the primary signals remain unchanged: energy production curbs persist, and the Strait of Hormuz remains effectively closed, with Iran managing specific conditions for limited traffic.
The longer these core disruptions remain unresolved, the greater the likelihood of longer-lasting economic damage. As the conflict teeters on the edge of becoming a protracted event, we shift our focus toward tracking its tangible impacts on U.S. and global economic resilience, including the expected inflation shock.
Mixed US Labor Market Signals
While last week’s US labor market data for March provided mixed signals, there was a more positive edge leading into the conflict. Growth in non-farm payrolls of +178k in March was stronger than expected. Revisions to prior months were small: net -7k. While monthly payroll data has been volatile recently, the March print suggests the labor market may have been on a more positive trajectory before the conflict. Importantly, job growth broadened across industries this month, moving beyond the narrow gains seen last month. However, this strength was tempered by the household survey, where the unemployment rate edged down to 4.3% primarily due to a drop in labor force participation, rather than an increase in employment. This reinforces that the recent “low dynamism” gear has continued.
Other parts of the labor report suggest some pressure for nominal labor income growth in March. Despite the stronger growth in payrolls, aggregate hours worked continued to contract in March, posting two consecutive months of decline. Annual growth in aggregate hours worked remains largely subdued at a mere +0.4% over the year. At the same time, growth in average hourly earnings also slowed to +0.2% over the month, and to a near-term low of +3.5% over the year. With headline inflation set to rise, this may begin to place added pressure on the spending power of that income.
Growth Resilience Under Pressure
The US growth resilience appears to be coming under pressure further into Q1. The latest Atlanta Fed GDP nowcast for Q1 showed growth edging lower to +1.6% based on data released last week:
- US Trade (Feb): The largest contributor to the slower growth run rate was a larger-than-expected trade deficit in Feb.
- Retail Sales (Feb): The contribution from consumer spending edged lower, despite a seemingly rosier retail sales result. The nominal retail control group data (which feeds into the GDP calculation) increased by +0.5% in Feb, but Jan growth was revised lower from +0.3% to +0.2%.
- The ISM Manufacturing PMI (Mar): Demand conditions remained moderate, and the broader headline PMI edged up from 52.4 in Feb to 52.7 in Mar. Unsurprisingly, the ISM prices index began to show the first impact of higher energy prices and supply chain disruption from the conflict, rising to the highest level since 2023. Just under two-thirds of firms reported higher prices this month, while the report also noted a broad range of commodity prices rising this month.
Global Impact and Inflation
The second pillar for the week involved data points more directly exposed to the geopolitical shock. The Eurozone prelim CPI for Mar showed headline inflation rising by +1% over the month – led by a +4.9% increase in energy prices. Annual headline inflation is expected to increase to +2.5% in March (from +1.9% in Feb). Importantly, core CPI has remained fairly stable at +2.3% in March (from +2.4% in Feb).
The global manufacturing PMI reading edged down slightly, but remained in positive expansion in March. The effects of the conflict were most evident in the sharp rise in the global input price index for March. The remainder of the full suite of global PMIs will be released this week (services).
Outlook for the week ahead: US inflation (PCE Feb, CPI Mar), ISM Services PMI, FOMC Minutes, RBNZ Meeting
A heavy data calendar remains in place this week as markets continue to navigate significant geopolitical uncertainty and headline risk. This week, we continue to focus on evaluating U.S. domestic resilience and tracking the broader global impact of the Middle East conflict.
U.S. Domestic Activity: The main focus this week is on the key US inflation data. This will include the February PCE (a pre-conflict baseline) inflation report and, importantly, the March CPI report, which will provide the first look at the pass-through of the energy price shock into US domestic inflation. Building out our view of the evolving domestic growth backdrop will be personal spending & income, factory activity, and the Q4 GDP (final release). Additionally, the latest FOMC minutes will offer further insight into the Committee’s decision to remain on hold at the March meeting.
Global Impact: On the global front, the final suite of S&P Global Services PMIs will be released, providing a view on any initial impacts of the conflict on the services sector.
Key factors & events to watch this week:
US Inflation
There will be two inflation reports this week. The first will be pre-conflict: the Fed-preferred PCE price index for Feb. The second will be a more closely watched CPI for March, which is expected to reflect the notable impact of rising energy prices.
- Headline PCE inflation for Feb is expected to increase by +0.4% over the month, up from +0.3% in Jan. This would leave headline PCE inflation unchanged at +2.8% in Feb.
- Core PCE inflation for Feb is also expected to increase by +0.4% over the month in Feb (from +0.4% in Jan). This would see annual core PCE inflation slow to +3% in Feb (from +3.1% in Jan).
- Headline CPI for March is expected to increase by +0.9% over the month, up from +0.3% in Jan. Annual growth in headline CPI is expected to jump to +3.4% in Mar, from +2.4% in Feb.
- Importantly, core CPI is expected to only edge slightly higher to +0.3% over the month in Mar (from +0.2% in Feb). Annual growth in core CPI is expected to increase to +2.7% in Mar, from +2.5% in Feb.
US Growth Backdrop
The tracking for US GDP growth so far in Q1 has edged lower to a +1.6% run rate based on the latest update of the Atlanta Fed GDP nowcast. Several reports this week will add further to the Q1 tracking:
- Personal spending for Feb is expected to increase by +0.5% (from +0.4% in Jan).
- Personal income for Feb is expected to increase by +0.3% in Feb (down from +0.4% in Jan).
- Factory Orders for Feb are expected to slow, falling by -0.2% in Feb (from +0.1% in Jan).
- The ISM Services PMI is expected to edge lower to 55 in Mar (from 56.1 in Feb).
- The final estimate for Q4 GDP is expected to confirm the +0.7% annualized growth rate.
US Federal Reserve
- The latest FOMC meeting minutes will be released this week.
- Fed Vice Chair Jefferson will give a speech on the economic outlook this week.
RBNZ
- The RBNZ meets this week and is expected to keep its policy rate unchanged at 2.25%.
Global Developments
- China’s CPI for Mar is expected to be little changed over the year at +1.2% in Mar (from +1.3% in Feb)
- Canada’s labour market survey for March is expected to show a small rebound in employment growth of +12.6k (from -83k in Feb), while the unemployment rate is expected to tick up to 6.8% (from 6.7% in Feb).
- The remainder of the S&P Global Services PMIs for March will be released this week.
This week, the US Treasury will auction and settle approx $460bn in ST Bills, with a paydown of $54bn.
The US Treasury will also auction the 3-year and 10-year Notes, and the 30-year Bond this week, to settle next week.
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
