by Kim | May 12, 2025
Key events this week – US CPI, PPI, retail sales, output, housing, and US Fed speeches
Recap from last week: Central Bank Decisions Diverge on Tariff Uncertainty
Elevated tariff uncertainty and trade tensions remained a key theme among central bank decisions last week; however, their decisions diverged as each central bank navigated its specific exposure to global trade headwinds and domestic issues.
The FOMC kept rates unchanged as expected, and remained firmly in ‘wait and see’ mode. US Fed Chair Powell cited elevated uncertainty over tariffs, their effects, the broader policy landscape, and therefore the right policy response at this stage of the process.
There’s so much uncertainty about the scale, scope, timing, and persistence of the tariffs. Source: FOMC Press Conference 7 May 2025
The Fed Chair acknowledged the weakening domestic sentiment but emphasized the “still solid” hard data. But with inflation still above the 2% target, the Fed Chair ruled out the opportunity for pre-emptive rate cuts. The still-solid data continues to support the Fed staying on hold as it waits for “economic conditions to evolve”. There was a new statement in the decision though – an important acknowledgment that the Fed sees rising risks to both sides of its dual mandate;
The Committee is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen. Source: FOMC Statement 7 May 2025
The BoE cut rates by 25bps – a decision split 5-4, with two members preferring a 50bps cut and two members preferring to keep rates unchanged. The decision to cut reflected ongoing progress on disinflation, enabling the MPC to withdraw, gradually, its policy restraint. The minutes of the decision suggested that there was a pre-emptive element to this rate cut;
Although the current impact of the global trade news should not be overstated, the news was sufficient for those members to judge that a reduction in Bank Rate was warranted. Source: BoE Statement 8 May 2025
The PBoC announced a series of rate cuts and monetary easing measures to support domestic activity, as the Chinese economy bears the brunt of the trade war.
“This isn’t just a boost for liquidity and credit — the focus on tech, consumption, and elderly care signals a broader push to support structural drivers of the economy.” Source: Bloomberg
China’s overall trade data for Apr was surprisingly solid, with export growth remaining firm at +8.1% over the year. While exports from China to the US fell by -21% from a year ago due to higher tariffs (Source: Bloomberg), the report suggested that exports from China to other countries increased to offset that fall. Imports from the US also fell by -14%, while the broader decline in China’s import demand eased to -0.2% over the year. This is the first “hard data” confirming slowing trade between the US and China. The opening of negotiations between the US and China offers a glimmer of hope for a path to a reduction in the currently “unsustainable” level of tariffs on US-China trade. At the time of writing, the US and China agreed to a short reprieve with tariffs lowered for the next ninety days as talks continue. The US is to lower tariffs on China to 30% (from 145%) for 90 days and China is to lower tariffs on the US to 10% (from 125%) for 90 days (source: Bloomberg).
While central bank decisions showed diverging responses to the trade uncertainty, the ‘soft’ indicators continued to paint a picture of an emerging tariff drag. Last week, the global S&P PMIs for April reflected some weakening in global economic momentum. The latest Global S&P PMIs revealed a notable deceleration in global economic momentum in Apr, reaching a 17-month low but remaining in positive territory. Service sector growth eased sharply while manufacturing output growth remained sluggish. This more widespread slowdown in growth was evident in major economies like China, the euro area, and the UK. The deceleration was also pronounced in the US – led by a notable slowdown in the larger services sector. Growth in US services activity slowed to a more modest pace as firms noted that rising trade uncertainty impacted demand in both domestic and export markets. Future output sentiment continued to wane. Rising input prices due to tariffs were noted as the key reason for the increase in output/selling prices in Apr.
One other piece of hard data that continued to soften last week was Canada’s labour market in Apr. Employment growth remained subdued at +7.4k as labour force participation increased – this resulted in the unemployment rate moving back up 6.9% in Apr, from 6.7% in Mar. Employment declined across some of the more tariff-exposed industries; manufacturing -33k and wholesale/retail -27k. Statistics Canada notes though that the proportion of unemployed due to layoffs in Apr (0.7%), was little changed from a year ago (0.6%). Falls in employment were partly offset by an increase in temporary employment due to the federal election.
Outlook for the week ahead; US CPI, PPI, retail sales, production, housing, and US Fed speeches
This week, the focus shifts to important US hard data – retail sales, CPI & PPI, industrial production, and residential construction. These datapoints will provide a critical early read on Q2 growth momentum and potentially signal whether it’s beginning to align with recent softer survey trends. All of this unfolds against the backdrop of trade talk optimism and Fed commentary.
Key factors & events to watch this week;
US CPI and PPI inflation for April is expected to show monthly inflation firming. The detail will be important as to whether this begins to reflect any potential tariff impacts. The CPI & PPI will provide a leading guide for the Fed-preferred PCE inflation measure.
- Headline CPI is expected to be unchanged at +2.4% over the year in Apr, versus +2.4% in Mar. CPI is expected to increase by +0.3% over the month, up from -0.1% in Mar.
- Core CPI is expected to increase by +2.85% in Apr, up from +2.8% in Mar. Core CPI is expected to increase by +0.3% in Apr, also up from +0.1% in Mar.
- Headline PPI is expected to slow to +2.5% in Apr from +2.75% in Mar. Over the month, PPI is expected to increase by +0.2%, up from -0.4% in Mar.
- Core PPI is expected to slow to +3.1% in Apr, from +3.3% in Mar. Monthly core PPI is expected to increase by +0.3% in Apr, up from -0.1% in Mar.
US retail sales for Apr are expected to slow after the much stronger result in Mar.
- US retail sales are expected to increase by +0.1% in Apr, down from +1.5% in Mar.
- Last month, the retail control group increased by +0.4% – this is the measures that will feed into the GDP result.
US manufacturing and output
- US industrial production for Apr is expected to stabilize at +0.1% after falling by -0.3% in Mar. The manufacturing output figure will be important – in Mar, manufacturing output increased by +0.3%, down from +1% in Feb. The PMI indicators of manufacturing output in Apr suggest a more stalled pace of expansion.
- The first US regional manufacturing surveys for May will be released this week – the NY Empire State and Philadelphia Fed surveys. The May survey data will be interesting to gauge any leading shift in sentiment since the pause on reciprocal tariffs in early Apr.
US residential construction
- Building permits are expected to be little changed at around 1.45m (annualized) in Apr, from 1.467m in Mar.
- Housing starts are expected to increase slightly to 1.36m in Apr, from 1.32m in Mar.
Important US Fed speeches this week;
- US Fed Chair Powell will give a speech later in the week on the Framework Review – it’s not clear whether this will include specific commentary on the current outlook.
- US Fed Vice Chair Jefferson and Fed Governor Kugler will both give speeches on the economic outlook. Speeches on the ‘economic outlook’ are usually more instructive for the specific views of FOMC members.
- Fed Governor Waller will also give a speech this week on Central Bank Research – again it’s not clear whether this will include specific commentary on the economic outlook.
Outside of the US, data will focus broadly on GDP growth results for Q1 (QoQ); Euro area (second prelim) +0.4%, the UK +0.6%, and Japan -0.1%.
There will be a range of important Aus data in the lead-up to the RBA meeting next week (20 May).
- The Wage Price Index for Q1 is expected to remain little changed at +0.8% in Q1, after a +0.7% increase in Q4 2024. The annual rate is expected to remain around +3.2%.
- The Aus labour market survey is expected to show continued modest employment growth of +21k in Apr and the unemployment rate to remain unchanged at 4.1%.
This week, the US Treasury will auction and/or settle approx. $632bn in ST Bills, Notes, and Bonds, raising approx. $42bn in new money.
QT this week: Approx $67.8bn of ST Bills, Notes, and Bonds will mature on the Fed balance sheet and will be reinvested. Approx $3.1bn of Notes & Bonds will mature on the Fed balance sheet and will be redeemed/roll-off the balance sheet.
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 Kim | May 5, 2025
Key events this week – FOMC & BoE meetings, ISM & S&P Services PMIs
Recap from last week: The tariff reality begins to bite.
The reality of tariffs appears to be starting to ripple through the US and global economy. The breadth of this impact will depend, in part, on the outcome of tariff negotiations – and so far, there seems to have been little progress on this front. There was, however, talk of a willingness to open negotiations between the US and China last week – a potential first step towards further de-escalation. The broad tariff situation currently facing many US firms is a baseline 10% tariff on all imports from many countries since 5 Apr, tariffs on Chinese imports remaining at an elevated 145%, and uncertainty over multiple negotiations aimed at staving off the much higher reciprocal tariffs before the 8 Jul deadline.
As the trade landscape continues to evolve, the reality of tariffs is now starting to materialize for firms. We are still in that leading-edge stage, relying on forward indicators, survey data, and anecdotes to understand the impending impact. Last week, key manufacturing PMI surveys highlighted an important shift from negative sentiment about anticipated tariffs to concrete anecdotes of firms scrambling to manage the real-time impact on their businesses. The underlying indexes suggested that the impact of tariffs was becoming more widespread among US manufacturing firms. Other key global S&P manufacturing PMIs, including Canada, Mexico, the ASEAN group, Taiwan, and South Korea reflected tariff impacts in the form of deteriorating orders, output, purchasing activity, and falls in future output sentiment. The global S&P manufacturing PMI slipped back into contraction. The services PMIs for Apr will be released this week and these will be crucial to help balance out the view of early-stage tariff impacts on the US and global economy.
A more real-time view of the tariff transmission into economic activity, particularly from slowing trade, comes from recent insightful interviews with the Executive Director for the Port of LA – linked here and here. These interviews highlight a unique perspective of how slowing trade is anticipated to begin affecting sectors of the economy in the near term. One of the important takeaways from the interviews is that progress on trade agreements will be crucial in the coming weeks.
The insights from the Port of LA underscore the ways tariff pressures are beginning to impact trade. The more significant, albeit lagging, “hard data” released last week, provides a broader perspective on these early-stage tariff impacts across the economy. To a degree, the anticipation of tariffs has already impacted the US Q1 GDP. US real GDP contracted as expected in Q1 by -0.3% (annualized), led by the fall in net exports and partially offset by inventories. Both are volatile series and reflect some front running of imports ahead of impending tariffs. Real final sales to domestic purchases (underlying domestic demand) slowed to +0.6% in Q1, from +0.7% in Q4.
Amid fears of tariff-driven inflation, US headline PCE inflation surprised to the downside in Mar. The Feb PCE inflation result, however, saw a moderate upward revision. Notably, monthly inflation slowed to zero in both the headline and core readings in Mar. Annual core PCE inflation decelerated to +2.6%, from an upwardly revised +3% in Feb. These slower monthly and annual inflation rates will likely be a positive sign for the FOMC as it meets this week, though it will likely view the March data as backward-looking and will be more focused on the Apr and May inflation figures to gauge any emerging tariff impact.
Finally, labor market data for Apr beat expectations and continued to suggest that US consumers remain on solid footing as tariff impacts loom. Payroll jobs increased by +177k in Apr, expecting + 129k. The two prior months were revised lower by -60k jobs, however, the 6mth average increased to +193k jobs. The unemployment rate was unchanged at a low of 4.2%. The growth in total hours remained positive and accelerated over the year. The JOLTS survey continued to reflect some vulnerability for the labor market, as labor demand indicators remained subdued. However, layoffs continued to decline. The Challenger Job Cut Announcement survey again pointed to elevated layoffs on the horizon. The leading reason for job cuts this month was “market/economic conditions” taking over from “DOGE” cuts last month. Given the lag effects, more industry-specific weakness may begin to be reflected in the May payrolls report.
The lagging hard data creates a challenging environment for policymakers and could complicate the policy response. How will the FOMC interpret the signals this week? In his last speech (16 Apr), US Fed Chair Powell preferred to keep options open regarding the path of policy rates. At the time, Powell maintained that the economy was “in a solid position” and that his focus was to ensure inflation expectations remained anchored in the face of price pressures from tariffs.
Based on the data last week, and at the time of writing, markets are now pricing in fewer rate cuts this year with the first cut now pushed out to the July meeting (source: CME Fedwatch).
Outlook for the week ahead; FOMC & BoE meetings, ISM & S&P Services PMIs, China Trade Data for Apr
This week, the focus shifts to central banks, notably the FOMC meeting. While it will be a somewhat quieter week for data, two important releases will help assess early-stage tariff impacts. First, the remaining global PMIs will provide a crucial view of service sector activity for Apr, balancing the manufacturing sector perspective on tariffs. Second, the Chinese trade data for Apr, scheduled for release this week, may begin to illustrate an impact on trade between the US and China.
Key factors & events to watch this week;
US FOMC meeting
- The FOMC is expected to keep policy settings unchanged. It will be important to see if there has been any shift in the Fed’s stance on its “wait-and-see” mode. Also important is how the FOMC will characterize the latest view of the economy and tariff impacts.
- There is a range of Fed speeches scheduled for the end of the week.
The BoE will also meet this week – and markets expect a 25bps rate cut at this meeting.
The US ISM services PMI for Apr will be an important counterpoint to the weaker manufacturing PMI last week. This is still survey data but will help to provide some insight into the momentum of the larger services sector of the US economy.
The global S&P services PMIs for Apr will also be released this week.
Canada’s labour market and employment for Apr will be released this week – and may also show some tariff effects. However, expectations are for employment growth to rebound by +24.5k after falling by -36.2k in the prior month. The unemployment rate is expected to be unchanged at 6.7%.
Finally, China’s trade data for Apr may provide some early insight into the trade impact of tariffs. The expected release date is 9 May but could be delayed.
This week, the US Treasury will auction and/or settle approx. $434bn in ST Bills, with a net paydown of -$11bn. The US Treasury will also auction the 3-year and 10-year Notes and the 30-year Bond this week – all will settle next week on 15 May.
QT this week: Approx $13.7bn 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 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 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 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
