by Kim | May 11, 2026
This weekly macro outlook highlights the key economic data releases, central bank events & speeches, and macro themes shaping global markets for the week of May 11, 2026.
Key Focus This Week:
- Central banks: Fed Chair Powell’s term ends on 15 May, Senate confirmation of Kevin Warsh TBC this week
- Major data: US inflation, consumption, & output – CPI, PPI, Retail Sales, & Industrial Production Apr
- Key themes: Geopolitical headline risks: US-Iran ceasefire deal, President Trump & President Xi Summit 14-15 May
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by Kim | May 4, 2026
This weekly macro outlook highlights the key economic events, central bank meetings, and macro themes shaping global markets for the week of May 4, 2026.
Key Focus This Week:
- Central bank meetings: RBA
- Major data: US labor market update Apr, ISM services PMI Apr, Final S&P global PMIs
- Key themes: US-Iran geopolitical headline risks
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by Kim | Apr 27, 2026
This weekly macro outlook highlights the key economic events, central bank meetings, and macro themes shaping global markets for the week of April 27, 2026.
Key Events to Watch:
- Central bank meetings: FOMC, BoJ, ECB, BoE, BoC
- Major data: Inflation (Aus Q1 CPI, US PCE Inflation Mar, Euro area CPI Apr, Tokyo CPI Apr), ISM Manufacturing PMI Apr, US GDP Q1
- Key themes: geopolitical risks, headline inflation
Recap of Last Week: Impasse Amidst Momentum
We are now into the ninth week of the conflict that continues to defy a diplomatic resolution. Previous optimism regarding a near-term de-escalation has been replaced by a renewed geopolitical impasse, with no clear roadmap for normalization. Despite this, markets currently appear to be pricing de-escalation as the most likely outcome.
However, a stark contrast remains between the physical “hard stop” of the Strait and oil flows, and an economy that is continuing to push forward. The main implication of the impasse, and what matters for now, is that conditions on the ground remain unchanged: the Strait is still effectively closed, and oil flows are still severely disrupted. This keeps the risk elevated that this disruption may evolve from a temporary headline price shock to something more structural.
Global CPI’s – Tracking the Headline Energy Impact
Last week, we continued to see the “leading edge” effects of higher energy costs in headline inflation. For now, these effects appear limited to headline inflation, with core inflation remaining steady or slightly lower – a critical input for central banks meeting this week.
- NZ Q1 CPI was higher than expected at +0.9% (expecting +0.6%). Annual inflation remained unchanged at +3.1%, above the RBNZ’s target band. Core inflation remained elevated at +2.6% in Q1, up from +2.5% in Q4 2025, and the details highlight firming in the inflation backdrop ahead of this conflict.
- Canada’s headline CPI increased to +2.4% in March (from +1.8% in Feb) due to higher gasoline prices. Excluding gasoline prices, the CPI slowed to +2.2% in March (from +2.4% in Feb). The BoC preferred measures of core inflation remained stable at an average of +2.3%.
- UK CPI for March increased to +3.3% over the year (from +3.0% in Feb), led by higher gasoline prices. Core inflation eased to +3.1% in March, from +3.2% in Feb.
- Japan National CPI for March increased to +1.5% (from +1.3% in Feb). While energy prices jumped +3.9% over the month in March, Government subsidies in prior months cushioned the impact. The BoJ’s core measure (ex-fresh food) rose to +1.8%, driven largely by sticky food inflation (+5.2%).
US Retail Sales Growth Improved in March
As expected, there was a sharp increase in nominal retail sales in March due to the increase in gasoline prices (+21% via the March CPI report). Nominal retail sales growth was higher than expected at +1.7% over the month in March (expecting +1.4%). Most categories contributed to the growth in retail sales.
Even after deflating the nominal series by the CPI, real US retail sales increased by a still solid +0.8% over the month in March. This result improved the near-term growth run-rate, shifting the Atlanta Fed GDP Q1 nowcast back to +1.24%. Within that, the consumer spending (PCE) contribution to the headline growth increased back up to +0.95% pts, although still behind the higher contribution recorded at the start of the quarter of around +2.0% pts.
Prelim PMIs for April – Mixed Outlook
The prelim S&P PMIs for April were another leading-edge indicator of firm-level impacts in the second month of the conflict. While there was some improvement, or resilience, in manufacturing activity and output, details suggest this was driven by a more defensive posture by firms. Manufacturing firms reported building inventories and increasing buying activity, fearing price hikes and shortages due to the conflict. Broadly, the output momentum in the services sector continued to slow, except for the US and UK reporting modest rebounds. Reports of higher input inflation were not limited to energy prices, with many reports, especially in the US, noting prices are rising for a “wide variety of goods and services”. Firms cited the uncertain environment for stalling employment growth. Sentiment shifted sharply lower, especially in the Eurozone, amid the energy price shock.
Outlook for the week ahead: Key central bank meetings, US and global inflation data, US GDP Q1, and ISM manufacturing PMI Apr
The geopolitical impasse will make this week’s central bank calculus increasingly complex. While policymakers prefer to ‘look through’ short-term supply-side energy spikes, the duration of the conflict may test the limits of that strategy. For now, central banks are expected to remain in a cautious, patient mode, contingent on the view of a near-term resolution.
However, the longer the conflict remains unresolved, and prices stay elevated, the greater the risk of persistent inflation pressure, which may force a policy tightening response to prevent de-anchoring of inflation expectations. Central banks are in a nervous “waiting game”, monitoring whether these ‘leading edge’ costs begin to bleed into core inflation and/or trigger a growth shock.
This may also be Fed Chair Powell’s last meeting as the Chair of the FOMC, with the DoJ reportedly halting its investigation. If so, then this clears the way for the Senate to confirm Kevin Warsh.
Key factors & events to watch this week:
Central Bank meetings and policy decisions
This will be the second round of meetings under this geopolitical uncertainty. Most central banks are expected to stay on hold this week, maintaining a cautious stance while balancing the uncertainty of the conflict duration with real-time impacts on inflation and growth. We’ll get a further sense of how policy makers are balancing mandate risks amid the conflict, and what it will mean for signalling on the policy outlook, contingent on the trajectory of the conflict.
- The BoJ is expected to keep policy settings unchanged, after signalling recently that a hike at this meeting was not assured. There will also be an updated set of forecasts released at this meeting.
- The FOMC is expected to keep policy settings unchanged.
- The BoC is expected to stay on hold.
- The ECB is expected to stay on hold.
- The BoE is expected to stay on hold.
Inflation reports
AUS Q1 CPI: This will be important in the lead-up to the RBA next week. The RBA has hiked rates at the prior two meetings, responding to an already firming inflation backdrop ahead of this conflict. These Q1 inflation numbers will provide the first view of the impact of higher energy prices.
- Q1 headline CPI is expected to increase by +1.4% in Q1, up from +0.6% in Q4 2025. Headline inflation is expected to increase to +4.1% over the year in Q1, from +3.6% in Q4.
- The monthly series is expected to show a sharp increase in headline CPI rising to +4.8% in March, from +3.7% in Feb.
US PCE inflation for March – this has been well telegraphed through the March CPI and PPI reports.
- Headline PCE is expected to remain firm at +0.6% over the month, up from +0.4% in Feb. Annual PCE inflation is expected to increase to +3.4% in March, up from +2.8% in Feb.
- Core PCE inflation is expected to remain more subdued, increasing by +0.2% over the month, down from +0.4% in Feb. Annual core PCE inflation is still expected to increase to +3.1% in March, up from +3% in Feb.
Euro area prelim CPI for April will provide the first look at the impact of higher energy costs in the second month of the conflict.
- Headline CPI is expected to increase to +3% over the year in April, from +2.6% in March. However, core CPI is expected to ease slightly to +2.1% in April, from +2.3% in March.
Japan’s Tokyo CPI will provide a limited view of inflation leading into April also.
- Core CPI – ex fresh food is expected to increase to +1.8% in April, from +1.7% in March.
US Growth
- The prelim Q1 GDP release is expected to increase to +2.2% (annualized), up from +0.5% annualized pace in Q4.
- The ISM manufacturing PMI for April is expected to show a modest increase to 53.2, from 52.7 in March.
- Personal income in March is expected to increase to +0.3%, up from -0.1% in Feb. Personal spending is also expected to lift by +0.9% in March, up from +0.5% in Feb.
US Treasury Issuance
This week, the US Treasury will auction and settle approx. $712bn in ST Bills, TIPS, Notes, Bonds, and FRN’s with a paydown of $17bn.
Approx $51.1bn in ST Bills, Notes, Bonds, and FRN’s will mature on the Fed balance sheet and be reinvested.
A detailed version of this outlook, including the full calendar of key data releases, is available in the briefing document below:
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
For a structured, technical analysis view of global markets that complements this macro outlook, explore the latest Mars Market Update.
by Kim | Apr 20, 2026
This weekly macro outlook note highlights the key economic, central bank, and geopolitical events shaping the outlook for global markets in the week ahead.
The key events for the w/c 20 April 2026: US retail sales, global CPI reports, Prelim S&P PMIs April
Recap of Last Week: The Leading-Edge Impact
We are starting the week under yet another fresh layer of geopolitical uncertainty.
The optimism over Friday’s announced reopening of the Strait of Hormuz has been clouded by the Iranian authorities’ weekend reversal and subsequent re-closure of the waterway. Further talks between the U.S. and Iran are expected to take place early this week to address the deadlock. While markets have been pricing in a successful de-escalation, we are now entering the eighth week of the closure, and the flow of oil production remains severely disrupted. The risk of structural damage to a global supply chain that is steadily losing its cushion remains elevated.
If the evolution of this conflict is now a primary driver for the macro outlook, then the latest data for March and April represents the leading edge of a transmission that is tracking the Strait’s closure in real-time. Whether these impacts become enduring or become more widespread will depend on the duration of the conflict.
So far, the data is continuing to reflect a sharp reaction in headline inflation alongside notable declines in both business and consumer sentiment.
US PPI Indicates Higher PCE Inflation for March
While the U.S. PPI rose by less than expected in March (+4% over the year vs. +4.7% expected), it still marked an acceleration from February’s +3.4%. There was a notable increase in energy and goods prices, while services (final demand) price growth slowed. Based on the March CPI and PPI reports, the latest Cleveland Fed PCE inflation nowcast shows headline PCE inflation is expected to increase to +3.4% in March (from +2.8% in Feb), while core PCE inflation is also expected to edge higher to +3.2% in March, from +3% in Feb. The FOMC will be increasingly concerned about the duration of this conflict and will be monitoring for evidence that these headline spikes are beginning to bleed into core inflation.
Fed’s Beige Book: Widespread Uncertainty as Margins Compress
The Beige Book for April will be a key input for the FOMC meeting next week, and inflation concerns were a key highlight. Unsurprisingly, the “vast majority” of districts reported moderate increases in inflation due to higher energy prices. Input price growth is currently outpacing increases in selling prices, suggesting that firms are absorbing costs through margin compression rather than full consumer pass-through at this stage. However, cost pressures are broadening beyond energy to include tariffs, technology, and healthcare. Employment remained in its low-hire, low-fire dynamic, as contacts expressed widespread uncertainty about future conditions.
Activity: Housing & Industrial Output Slowing
Growth signals remained lacklustre last week. US housing market activity remained at or near pandemic lows, as existing home sales fell to a 3.98m annualized pace in March, while the home builder sentiment index for April fell to 34, approaching the Covid-lows.
Industrial output for March fell by -0.5% as manufacturing output fell by -0.1% in March (from +0.4% in Feb). More notable falls in output were recorded across the mining and utilities sectors. Headwinds continue to weigh on small business owners; the NFIB Small Business Optimism Index fell again in March, with a sharp 11-point decline in earnings trends highlighting the impact of elevated input costs.
FOMC Policy Implications: The Waller Framework
Fed Governor Waller provided a clear framework for navigating this conflict last week. The policy outlook currently hinges heavily on how this conflict evolves. He presented two scenarios:
Normalization: if the Strait reopens and oil flows start to normalize, he could look through a short-lived impact from energy prices on inflation. With his concern over the labor market still elevated, he would expect a possible rate cut late in the year as the outlook ‘steadies’. At the time of writing, and likely reflecting the optimism from the Strait reopening late last week, the market has begun to reflect that scenario in the FFR probability distribution – shifting further toward a Dec/late 2026 rate cut (source: CME FedWatch).
Risk of a Longer Duration Conflict: His second scenario, though, highlights the core concern for most central bankers related to this conflict:
“But the longer energy prices remain elevated and the Strait is constrained, the greater the chances that higher inflation gets embedded across a wide variety of goods and services, various supply chain effects start to emerge, and real activity and employment start to slow.”
Balancing the Fed’s dual mandate risks would likely mean maintaining the policy rate at the current target range for longer. In other words, due to the downside risks of the labor market, Waller doesn’t see rate hikes on the table at this point.
Global Central Bank Context
Based on the uncertainty over the conflict in the Middle East, now into its eighth week, several central bankers signalled a more cautious stance for upcoming meetings.
BoJ: Governor Ueda’s speech indicated risks remain “two-sided,” shifting the April meeting to a toss-up between a hold and a hike.
ECB: Various ECB speakers signalled a growing preference not to ‘rush’ an April decision, leaning toward a more cautious timeline.
RBA (the exception): Pricing for another RBA rate hike in early May increased after the March labour market report (source: ASX RBA Rate Tracker).The unemployment rate stayed unchanged at 4.3%. The latest business and consumer confidence reports show notable falls in confidence amid fuel price increases and interest rate rises. For the most part, this souring in sentiment is yet to flow through to broader business conditions (as of March).
Outlook for the week ahead: US retail sales, global CPI reports, Prelim S&P PMIs for April
The week ahead will continue to focus on the elevated geopolitical headline risk – will the Strait be open or closed?
It will remain a relatively quiet week on the data front. We continue to track the transmission of the energy price shock: this week through US retail sales for March and through global CPI reports for Japan, the UK, NZ, and Canada for March.
The preliminary S&P PMIs for April will also provide further insight into the evolution of activity, prices, and sentiment in the second month of the conflict and at the start of Q2.
It’s the blackout week ahead of the FOMC meeting next week, although there will be a speech by Fed Governor Waller. He is not likely to cover the economic outlook or monetary policy in this speech.
The confirmation hearing for the new Fed Chair nominee is expected to take place this week.
Key factors & events to watch this week:
US Retail Sales
The key highlight will be US retail sales for March, which is still early in the conflict. US retail sales are presented in nominal terms and are likely to be ‘inflated’ due to the higher gasoline prices.
- US retail sales for March are expected to increase by +1.4% over the month, up from +0.6% in Feb. The growth ex-gasoline versus the prior month should provide a consistent view of retail sales growth.
- The retail control measure increased by +0.5% in Feb, and this will be a key measure for how retail sales flow through to GDP expenditure measures.
The FOMC and Central Bank Speeches
- It’s the blackout period ahead of the FOMC meeting next week.
- However, there is one speech scheduled this week: Fed Governor Waller: Modernizing Reserve Bank Operations, Brookings Institution Event, Washington, D.C.
- The confirmation hearing for Kevin Warsh is scheduled for 21 April.
Global CPI reports – March
Again, headline inflation rates are expected to increase, while core inflation is expected to be little changed, reflecting still an early stage of the energy price shock.
- Canada CPI: headline CPI is expected to increase by +1.1% over the month in March, up from +0.5% in Feb. Headline inflation is expected to increase from +1.8% in Feb. Annual core inflation: the trimmed mean is expected to remain unchanged at +2.3% over the year, while the median inflation rate is expected to edge higher to +2.4% over the year, up from +2.3%.
- NZ CPI for Q1: CPI is expected to increase by +0.8% over the quarter, up from +0.6% in Q4 2025. The annual rate is expected to slow to +2.9% in Q1 from +3.1% in Q4.
- UK CPI: headline CPI is expected to increase to +3.3% in March, up from +3% in Feb. Core CPI in the UK is expected to be unchanged at +3.2%.
- Japan National CPI: the headline CPI had slowed to +1.3% in February, and the March result may reflect both the rise in energy prices as well as government subsidies. The BoJ-preferred core CPI ex fresh food is expected to edge slightly higher to +1.7% in March, from +1.6% in Feb.
The preliminary round of S&P Global PMIs for April will be released for key economies, providing some insight into the evolution of growth momentum, prices, and sentiment as we head into the second month of the conflict.
This week, the US Treasury will auction and settle approx. $460bn in ST Bills with a paydown of $44bn. The US Treasury will also auction the 5-Year TIPS and 20-Year Bond this week – both to settle next week.
Approx $18.6bn in ST Bills will mature on the Fed balance sheet and be reinvested.
A detailed version of this outlook, including the full calendar of key data releases, is available in the briefing document below:
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Apr 13, 2026
The key events for the w/c 13 April 2026: US PPI, Fed Beige Book, Speeches
Macro Recap: Early US Inflation Effects
The ceasefire optimism from last week is at risk following the breakdown of talks between the US and Iran over the weekend. With the Strait of Hormuz closure entering its seventh week and the U.S. threatening its own “blockade”, we continue to skirt the boundary between a more temporary inflation and supply disruption and a potentially broader, longer-lasting structural impact.
While the US blockade threat may be another diplomatic “escalate to de-escalate” tactic, the longer these production and maritime disruptions remain unresolved, the greater the likelihood that this energy shock evolves from a short-term supply squeeze into a broader near-term headwind for the global economy.
US PCE Inflation Pre-Conflict Baseline
The risks are already emerging as the energy price shock translates into US domestic inflation data released last week.
The Fed-preferred PCE inflation gauge for Feb provided a pre-conflict baseline – showing inflation was already more persistent leading into this conflict. Both the headline PCE inflation (at +2.8%) and core PCE inflation (at +3%) have edged higher, especially over the last three months, partly driven by the ongoing pass-through of tariff-led core goods inflation. If there is a silver lining, it’s that the trimmed mean and median PCE measures suggest that this recent firmness has not been part of a broadening bout of inflation. However, the inflation rate among the top outliers remains a concern for the Fed, with the top “trim” showing a weighted average inflation rate of +21% (one-month annualized) in Feb.
The March CPI Shock
The more leading-edge March CPI sounded a warning over the swift transmission of higher energy prices into US domestic headline inflation. CPI energy prices jumped by +11% in March, led by a +21% increase in gasoline prices over the month in Mar. As a result, headline inflation jumped from +2.4% in Feb to +3.3% in Mar. These higher energy prices are yet to flow through to the core CPI measure, which still increased to +2.6% in Mar (from +2.4% in Feb). A more stable core inflation backdrop (and anchored expectations) through this shock enables the Fed to continue to “look through” what could still be a short-term disruption. However, the primary risk for the Fed is that the longer these supply-side disruptions persist, the more likely they are to anchor higher inflation expectations, keeping the committee alert to broad-based pass-through effects.
Growth “Resilience” Under Pressure
These inflation pressures arrive at a time when growth momentum also appears to be cooling. While the ‘final’ GDP report for Q4 showed growth slowing to a mere +0.5% annualized rate (impacted by the government shutdown), the expected rebound in Q1 has yet to materialize. So far, the Atlanta Fed GDP nowcast tracking (data roughly reflecting about two-thirds of the way through Q1) shows the growth run rate slowing to a +1.3% annualized pace (from +1.6% a week ago). While there has been a drag from net exports, the contribution from consumer spending so far in this quarter has become smaller (usually the largest contributor), even before the effects of higher energy prices. The US services PMIs released last week (March) signalled a number of concerns with slowing growth momentum, rising prices, and pressure on employment growth. The further notable fall in the Michigan consumer sentiment measures at the start of Apr underscores the fragile nature of the consumer spending outlook.
FOMC Minutes
FOMC minutes reveal a committee already concerned that “further progress in reducing inflation had been absent in recent months”. The Fed is now managing the tightening tension between its dual mandate goals of employment (still downside risks) and price stability (upside risks, especially due to developments in the Middle East). Regarding the Middle East, the Committee noted that higher oil prices would “delay the anticipated decline in inflation” and could cause expectations to drift upward. For now, the conflict will keep the Fed in a ‘wait and see’ mode as it monitors the scope and duration of the shock, effectively pushing the timing of any potential rate cuts further out. Current market pricing shows the Fed on hold through the next twelve months.
Outlook for the week ahead: US PPI, Fed Beige Book, Speeches
The week ahead will continue to focus on the elevated geopolitical headline risk as the US threatens a blockade (or a deal).
It will be a relatively quiet week on the data front. While not market movers on their own, the data points may provide a “health check” on how the US economy is absorbing the initial wave of the shock. This week: US PPI for March, the Fed Beige Book, several March data points (industrial production & existing home sales), and a number of April surveys of US housing and manufacturing.
It’s the final week of Fed speeches ahead of the blackout period. This week, Fed Governor Waller will give a speech on the economic outlook – likely an important perspective for how the Fed may navigate the current conditions leading into its upcoming meeting on 28-29 April.
Outside of the US, there will be a range of Chinese data for March and Australia Labour Market for March.
The IMF spring meetings will take place this week, including a range of speeches throughout the week.
Key factors & events to watch this week:
US data
There will be a range of US data this week (both March and April data points), providing some early/limited insight into how parts of the US economy have been affected by the conflict so far.
- The PPI report for March will help to provide a guide for the upcoming Fed-preferred PCE inflation measure.
- Headline PPI is expected to increase by +1.2% over the month in Mar (from +0.7% in Feb) – this would see annual PPI inflation increase to +4.7% in Mar (from 3.4% in Feb).
- Core PPI is expected to increase by a more moderate +0.5% in Mar (also +0.5% in Feb), which would still see annual core PPI increase to +4.2% in Mar (from +3.9% in Feb).
- US import and export prices may also begin to reflect some pricing effects in Mar.
- US housing data for Mar & Apr may reflect the increase in mortgage rates through March. Existing home sales are expected to slow to a 4m annualized rate in Mar, from 4.1m in Feb. The NAHB home builder sentiment survey for Apr is expected to remain subdued at 37.
- US Industrial Production for Mar is expected to increase by +0.2% (after falling by -0.1% in Feb). There will also be a range of Apr regional manufacturing surveys providing a view on manufacturing activity and the business outlook, now seven weeks into this conflict.
- The Fed’s Beige Book for the last six weeks will provide important anecdotes from business contacts among the Fed districts on growth, spending, employment, sentiment, and inflation over the last six weeks and will be an important input for the upcoming Fed meeting.
Fed & Central Bank Speeches
- This is the final week for speeches leading up to the next Fed meeting on 28-29 April. There will be a range of speeches this week; however, the main one will be Fed Governor Waller on Friday, speaking on the ‘economic outlook’ – which will be an important speech for outlining his view on assessing current conditions. Governor Waller also shifted his view at the last meeting from dissenting in favour of a cut at the Jan meeting to voting for a hold in Mar.
- There will also be a range of other Central Bank speeches this week as part of the IMF Spring meetings – likely to be dominated by the Middle East conflict fallout.
China Economic Data
This week, key growth, output, retail, and trade data are expected to close out Q1.
- GDP for Q1 is expected to increase by +1.4% over the quarter, and +5% over the year (up from +4.5% in Q4 2025).
- Industrial production and retail sales (annual) growth in Mar is expected to slow slightly.
- Trade data for Mar is also expected to show slower growth in imports and exports over the year.
Australian Data
There will be several points of interest this week ahead of the RBA meeting on 4-5 May.
- The NAB business confidence & conditions survey for Mar will provide some insight on key survey measures quoted by the RBA previously on capacity utilisation and what it means for their assessment of the inflation backdrop.
- The Aus Labour Market report for Mar is expected to show net employment growth of +20k (down from 49k in Feb), while the unemployment rate is expected to stay unchanged at 4.3%.
This week, the US Treasury will auction and settle approx. $629bn in ST Bills, Notes, and Bonds with a paydown of $5bn.
Approx $35bn in ST Bills, Notes, Bonds, and TIPs will mature on the Fed balance sheet and 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 6, 2026
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
