Macroeconomics: The Day Ahead for 20 May

The week ends on something oa damp squib in terms of scheduled statistics and events, with a heavily frontloaded data run featuring the overnight Japan national CPI, German PPI (rising at double the expected m/m pace to yet another fresh record) and the likely focal points of UK GfK Consumer Confidence and Retail Sales, with only Taiwan’s Export Orders and provisional Eurozone Consumer Confidence ahead. There are the large than expected 15 bps cuts to China’s 5-yr LPR, while the 1-yr was left unchanged, which both rubber stamps last weekend’s 20 bps cut in mortgage rates for first time buyers, but also underlines that China is focussed on targeted stimulus measures, rather than wholesale measures, in this case obviously trying to give a boost to key, but ailing property sector. There are also a goodly number of BoE and ECB speakers on hand, while Deere & Co will be the highlight of a thin run of corporate earnings. Next week being the last full working week of the month brings the usual run of business surveys, including G7 flash PMIs, German Ifo and Eurozone EC Confidence, with a more modest run of official statistics dominated by the US with Durable Goods, Personal Income and Private Consumption (PCE) along with New and Pending Home Sales. Elsewhere the UK has PSNB, Japan Tokyo CPI mad Australia has Q1 Private CapEx and Construction Spending along with monthly Retail Sales. On the central bank, the ECB will be out in force on the speaking circuit next week, the Fed publishes its May 4 minutes, while there are RBNZ and Bank of Korea policy meetings, and some rather tricky rate decisions in the EM space: Ghana, Indonesia, Nigeria and Pakistan, while the Bank of Israel is expected to raise rates a further 25 bps to 0.60%.

** U.K. – May GfK Consumer Confidence & April Retail Sales **

– A sharp divergence is on offer for today’s UK data, with an unexpected 1.4% m/m rebound in Retail Sales contrasting with a further dip in GfK Consumer Confidence to match the all-time low at -40. Retail Sales were likely given a boost by the Easter holiday, for which seasonal adjustment is always difficult given the lack of a fixed date, with sales boosted by alcohol, confectionary and tobacco in supermarkets, as well as higher online clothing sales, with the fall in y/y terms wholly due to base effects from April 2021, when Cocid-19 restrictions were being lifted. Sales were nevertheless down -0.3% in the 3 months to April, improving somewhat on the -0.7% recorded for March. By contrast Gfk Consumer Confidence slipped again to -40 vs. April’s -38, and perhaps most notably the large purchases climate dropped to -35 from -32, having been at -6 as recently as December, and per se underlining the squeeze on household incomes. However it is worth remembering that the index has shown a strong correlation with consumer views on the political status quo, and the array of government sleaze stories will only have served to dampen morale. Overall it will still leave the BoE in the same bind, behind the curve on inflation, but fretting over a potentially sharp slowdown, above all in consumer spending.