Macroeconomics: The Day Ahead for 11 May

Today’s schedule is a case of from famine yesterday to feast, with a busy data schedule accompanied by a plethora of central bank speakers, European Commission’s economic forecasts update (likely to see an array of upgrades), UK Queen’s Speech, key monthly oil market reports from OPEC and EIA, and the earnings schedule topped by steelmakers and Japan. The data run is quite heavily frontload loaded with China’s PPI and CPI, UK BRC Retail Sales (super strong, but totally distorted by base effects), Malaysia and Philippines Q1 GDP, German WPI and Turkey’s Current Account to digest. Ahead lies German’s ZEW survey, Brazil’s IPCA inflation, US NFIB Small Business Optimism and JOLTS Job Openings. It will also be a busy day for govt debt auctions: Japan and Dutch 10-yr, UK 5 & 40-yr and US 3-yr, while Nissan, China Steel, Kobe Steel, Mitsui Mining Thyssenkrupp and a further slew of European banks feature on the corporate earnings run. The Eid Al-Fitr holiday marks the end of Ramadan and sees much of the Islamic world closed for some or all of the rest of the week.

China’s inflation data emphasized that while PPI is surging, there is no evidence of any major pass through pressures, with PPI well above forecasts at 6.8%, but CPI missing estimates at just 0.9%, with core CPI edging up to 0.7% from 0.3%. Within PPI, the sharpest increases were wholly unsurprising with Oil & NatGas up 85.8% y/y, while Ferrous Metals Processing rose 30.0% y/y, but Consumer Goods up just 0.3% y/y (vs. prior 0.1%), within which Consumer Durables remained in deflation at -0.9% y/y. In trend terms CPI now looks unlikely to reach the government target of 3.0%, and by extension rules out any rate hikes from the PBoC, but as previously noted it is regulatory, and to a lesser extent reduced fiscal largesse, which are the primary risks to the growth outlook.

Germany’s ZEW Current Situation is seen posting a sharper rebound to -41.6 from -48.8 on the back of better incoming data and accelerated vaccination roll-out, however the gap to Expectations (f’cast 72.0 vs. prior 70.7) is expected to remain colossal. Rather more significant is yet another surge in Germany’s WPI, up 1.1% m/m to push the y/y rate up to 7.2% from 4.4%, with base effects playing a major role, but the m/m data underlines that there are pass through pressures.  US NFIB Small Business Optimism is expected to post a more pronounced bump higher to 100.8 from 98.2, with the already published Employment indices highlighting record levels of vacancies, but also some wage pressures and skills shortages. But as has been seen in recent months, it is economic expectations (see chart) that will be key, with March’s -8 still well below November’s +8. The OPEC and EIA reports will have particular prominence as oil prices threaten a break out of the top of ranges that have been in place since March. The UK Queen’s Speech (the first for 16 months) is expected to focus on major legislative changes to planning laws and social care, and there remain a number of bills promised in the last one on Worker’s Rights, Environment and Renter’s rights which will doubtless be recycled into this one.