Key Events In The Coming Week: Inflation, Spending In The Spotlight

With the French election now finally in the rearview mirror, this week's focus is on global inflation releases, with the spotlight falling on the US and China, as well as retail sales in the US. We also have BoE and RBNZ rates meetings. In other data we note industrial production in the Eurozone, UK and Norway along with US retail sales and Fed speakers.

Key developed market events

• Thursday, May 11: New Zealand, RBNZ meeting. GS 1.75%, consensus 1.75%, last 1.75%. Looking to the May meeting, while the RBNZ is likely to remain on hold for now, we expect upgrades to the Bank's inflation forecasts and—possibly—a more constructive description for the global growth outlook.
• Thursday, May 11: United Kingdom, BOE meeting. GS 0.25%, consensus 0.25%, last 0.25%. We expect no change in Bank Rate or in other policy settings, yet for the MPC to express some skepticism about the flatness of the forward curve for UK rates.
• Friday, May 12: United States, CPI (Apr). Core: +0.21% mom, consensus +0.2% mom, last -0.1% mom. We expect a 0.21% increase in April core CPI following last month’s outright decline, reflecting a relatively large state-level tobacco tax increase as well as the waning drag from Verizon unlimited data plans.
• Friday, May 12: United States, Retail sales (Apr). Core: +0.4% mom, consensus +0.4% mom, last +0.6% mom. We estimate core retail sales (ex-autos, gasoline, and building materials) rose 0.4% in April, reflecting improving sales in mall-based discretionary categories after tax refund-related weakness in February and a likely drag in March from unseasonably cold and snowy weather. At the same time, preparations for Winter Storm Stella likely boosted food and beverage sales (+0.5% in March), and we look for sequential softness in that category.

In emerging markets, there is a presidential election in South Korea, as well as rates meetings in Malaysia, Peru and the Philippines. Rating reviews in Egypt, Hungary, Poland, Ukraine and Oman.

• Tuesday, May 9: Korea, Presidential election. According to various opinion polls, Mr. Moon, Jae In of the largest left-wing party (The Minjoo) has consistently been the front-runner in the race. On implications of the election result—we do not expect any major legislative breakthrough that could change the governance structure dramatically in the short term, nor do we see clear implications of the election for monetary policy and the KRW. Election platforms of all major candidates are largely based on fiscal prudence, which has widely been accepted by all major parties. Once elected, a new government might attempt to undertake counter-cyclical fiscal policy more actively but political and legal barriers would likely remain high. We hence expect a modest supplementary budget of less than 1% of GDP. (For more discussion please refer to our report Korea Views: The presidential election on May 9—key policy issues and market implications, May 5, 2017)
• Thursday, May 11: Peru, Monetary Policy Committee meeting. GS: 4.25%, consensus: 4.25%, last: 4.25%. Despite the dovish message from the March MPC meeting statement, we expect the central bank to keep the policy rate on hold in order to better anchor inflation expectations, which have risen above the 3.0% target upper limit for the first time since June 2016. We believe the medium-term balance of risks supports a moderate easing cycle in the near term and recognize the risk of a preemptive rate cut in May, but we see a greater likelihood of the first cut taking place at the June meeting.
• Friday, May 12: India, CPI (Apr). GS +3.3% yoy, consensus NA, last +3.8% yoy. We forecast headline CPI inflation to decelerate to 3.3% yoy in April from 3.8% in March due to favorable base effects. On a seasonally adjusted sequential basis, we expect headline CPI index to rise by 0.3% mom. Daily data on retail food prices suggest some (although limited) reversal post-demonetization. An appreciating INR will likely keep imported oil inflation low. We expect core inflation to remain unchanged at 4.9% yoy and core inflation excluding transport (RBI’s preferred measure of core inflation) to increase slightly on the back of rising household inflation expectations.
• Friday, May 12: Malaysia, Bank Negara Malaysia meeting. GS 3.00%, consensus 3.00%, last 3.00%. We expect Bank Negara Malaysia (BNM) to keep the policy rate unchanged at 3% at its meeting next week. While headline inflation surged in March on rising domestic fuel prices, core inflation remained unchanged at 2.5% yoy. Overall, the BNM does not expect this cost factor to put significant upward pressure on broader price trends given stable domestic demand conditions, as recently noted by BNM governor Muhammad Ibrahim. We continue to expect the central bank to remain on hold at its upcoming meeting, maintaining our view that full-year growth will improve slightly to 4.3% in 2017 from 4.2% in 2016, with a modest upside risk given strength in 1Q activity.

Deutsche Bank's Jim Reid breaks down this week's main events on a daily basis, starting with Monday when the only data in the US is the April labour markets conditions index.

Kicking off Tuesday will again be Germany where March trade and industrial production data is due. In France we’ll also get the Bank of France business sentiment reading while in the US in the afternoon it is quiet again with the April NFIB small business sentiment reading, March JOLTS job openings and March wholesale inventories the only data due.

Kicking off Wednesday is China where we’ll get April CPI and PPI prints. In France trade data and industrial and manufacturing production reports are due. Over in the US on Wednesday we will get the April import price index reading and April monthly budget statement.

In Asia on Thursday the lone release is from Japan where we get  the March trade balance. In the UK we then get industrial and manufacturing production for March along with the latest trade balance. The Economic Commission is also due to release its latest economic forecasts while around lunchtime we’ll get the BoE policy meeting outcome and latest inflation report. In the US on Thursday we are due to get PPI and initial jobless claims data.

It’s a busy end to the week on Friday. In Germany we get Q1 GDP and April CPI while Euro area industrial production for March is also scheduled. We finish the week in the US with the April CPI report, April retail sales figures and first look at the May University of Michigan consumer sentiment reading.

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Finally, here is Goldman with a focus on the US where the key economic releases this week are the retail sales and CPI reports on Friday. In addition, there are several scheduled speaking engagements by Fed officials this week.

Monday, May 8

• 08:35 AM St. Louis Fed President Bullard (FOMC non-voter) speaks: Federal Reserve Bank of Louis President James Bullard will speak at a policy session at the 22nd Annual Financial Markets Conference hosted by Federal Reserve Bank of Atlanta in Fernandina, Florida. The topic of the conference is “Shifting Sands of Low Interest Rates.” Audience Q&A is expected.
• 08: 45 AM Cleveland Fed President Mester (FOMC non-voter) speaks: Cleveland Federal Reserve President Loretta Mester will give a speech on the economic outlook and monetary policy at the Chicago Council on Global Affairs Public Breakfast Program in Chicago, Illinois. The title of her remarks is “From Main Street to Wall Street: Economic Growth, Monetary Policy, and the Federal Reserve.” Audience and media Q&A is expected.
• 02:00 PM Senior Loan Officer Opinion Survey, 2017Q2: The Fed will release its quarterly Senior Loan Officer Opinion Survey. The 2017Q1 release showed unchanged lending standards on commercial and industrial loans while standards on CRE loans continued to tighten. Demand for residential mortgages as well as construction and multifamily residential loans all declined. In past research, we have found the survey to be a valuable predictor of upcoming business investment growth.

Tuesday, May 9

• 06:00 AM NFIB small business optimism, April (consensus 104.0, last 104.7)
• 09:00 AM Minneapolis Fed President Kashkari (FOMC voter) speaks: Minneapolis Federal Reserve President Neel Kashkari will give a speech at the Minnesota High Tech Spring Conference. Audience Q&A is expected.
• 10:00 AM JOLTS job openings, March (last 5,743k)
• 10:00 AM Wholesale inventories, March final (consensus -0.1%, last -0.1%)
• 01:00 PM Boston Fed President Rosengren (FOMC non-voter) speaks: Boston Federal Reserve President Eric Rosengren will give the keynote speech at the Risk Management for Commercial Real Estate Conference at NYU Stern School of Business in New York, New York.
• 04:15 PM Dallas Fed President Kaplan (FOMC voter) speaks: Dallas Federal Reserve President Robert Kaplan will give a speech at the Dallas Regional Chamber Lower Middle Market Investment Summit in Dallas, Texas. Audience and media Q&A is expected.

Wednesday, May 10

• 08:30 AM Import price index, April (consensus +0.2%, last -0.2%)
• 10:00 AM Atlanta Fed business inflation expectations, April (last +1.9%)
• 12:00 PM Boston Fed President Rosengren (FOMC non-voter) speaks: Boston Federal Reserve President Eric Rosengren will give the keynote speech at a luncheon jointly hosted by the Lake Champlain Regional Chamber and Central Vermont Chamber of Commerce in South Burlington, Vermont. Audience Q&A is expected.
• 02:00 PM Monthly budget statement, April (consensus +$177.0bn, last -$176.2bn)

Thursday, May 11

• 06:25 AM New York Fed President Dudley (FOMC voter): New York Federal Reserve President William Dudley will give a speech on the “Benefits and Challenges from Globalization” at an event hosted by the U.S. India Business Council, the Confederation of Indian Industry, and the Bombay Stock Exchange Limited in Mumbai, India. Audience Q&A is expected.
• 08:30 AM PPI final demand, April (GS +0.2%, consensus +0.2%, last -0.1%): PPI ex-food and energy, April (GS +0.1%, consensus +0.2%, last flat); PPI ex-food, energy, and trade, April (GS +0.1%, consensus +0.2%, last +0.1%): We estimate that headline PPI rose 0.2% in April, reflecting moderately higher energy prices. We estimate PPI ex-food, energy and trade services rose by 0.1%. The March producer prices report was softer than expected, reflecting softer core final demand inflation and lower energy prices. However, March core finished goods prices and upstream input costs continued to firm.
• 08:30 AM Initial jobless claims, week ended May 6 (GS 250k, consensus 245k, last 238k): Continuing jobless claims, week ended April 29 (consensus 1,975k, last 1,964k): We estimate initial jobless claims rebounded 12k to 250k, as we expect the level normalized toward the recent trend following two weeks of volatility, itself likely related to the timing of Good Friday and school holidays. Continuing claims – the number of persons receiving benefits through standard programs – have trended down in recent weeks, suggestive of additional labor market improvement that we expect to continue.

Friday, May 12

• 08:30 AM CPI (mom), April (GS +0.24%, consensus +0.2%, last -0.3%); Core CPI (mom), April (GS +0.21%, consensus +0.2%, last -0.1%); CPI (yoy), April (GS +2.3%, consensus +2.3%, last +2.4%); Core CPI (yoy), April (GS +2.0%, consensus +2.0%, last +2.0%): We expect a 0.21% increase in April core CPI following last month’s outright decline, reflecting a $2-per-pack tobacco tax increase in California, as well as a smaller drag from Verizon unlimited data plans. We also expect a favorable swing in the weather to boost apparel prices, following a particularly snowy March. On the negative side, we expect only modest reacceleration in owners’ equivalent rent inflation – which fell to +0.17% in March from +0.26% in February– reflecting emerging oversupply issues in multifamily housing. We estimate a 0.24% rise in headline CPI reflecting rising food prices and mixed energy quotes. This would be consistent with the year-over-year rate slowing by one tenth to 2.3%.
• 08:30 AM Retail sales, April (GS +0.5%, consensus +0.6%, last -0.2%); Retail sales ex-auto, April (GS +0.5%, consensus +0.5%, last flat); Retail sales ex-auto & gas, April (GS +0.5%, consensus +0.4%, last +0.1%); Core retail sales, April (GS +0.4%, consensus +0.4%, last +0.6%): We estimate core retail sales (ex-autos, gasoline, and building materials) rose 0.4% in April, reflecting improving sales in mall-based discretionary categories following tax refund-related weakness in February and a drag from unseasonably cold weather in March. At the same time, preparations for Winter Storm Stella likely boosted food and beverage sales in March (+0.5% mom sa), and we look for some payback in that category in April. We estimate a firmer 0.5% increase in the ex-auto ex-gas component, as improving weather should boost sales in both the building materials and food services categories. We also estimate a 0.5% increase in both the headline and ex-auto components, reflecting a small month-to-month pullback in gas prices and modest rebound in auto SAAR (mom sa).
• 10:00 AM University of Michigan consumer sentiment, May preliminary (GS 97.3, consensus 97.0, last 97.0): We estimate the University of Michigan consumer sentiment index rose 0.3pt to 97.3 in May, after pulling back 1.0pt in the April final reading (relative to the preliminary measure from the first half of the month). Our forecast reflects some sequential improvement in higher frequency consumer surveys as well as an expected boost from rebounding stock prices. Gas prices in early May were little changed relative to their April averages, suggesting little scope for an impact on the report’s measure of 5- to 10-year ahead inflation expectations, which at 2.4% in April was at the low end of its recent range.
• 09:00 AM Chicago Fed President Evans (FOMC voter) speaks: Chicago Federal Reserve President Charles Evans will participate in a panel discussion on current economic conditions and monetary policy at the 56th ACI Financial Markets Association World Conference in Dublin, Ireland. Audience and media Q&A is expected.
• 12:30 PM Philadelphia Fed President Harker (FOMC voter) speaks: Philadelphia Federal Reserve President Patrick Harker will give a speech on the economic outlook at the Drexel University Urban Economics Policy Conference in Philadelphia. Audience and media Q&A is expected.

Source: BofA,Barclays, DB, Goldman