Macroeconomics: The Day Ahead for 30 May

Today’s schedule of data looks busy, above all in the US, but may ultimately lack the sort of punch to move markets in “month end” mode. There are Australia’s robust Q1 CapEx, Swedish Q1 GDP (revised very sharply higher from the flash estimate of flat q/q to 0.7% q/q, providing yet another reminder not to overinterpret provisional data) and Spanish HICP to digest ahead of the EC Confidence surveys, US revised Q1 GDP, weekly Jobless Claims, Goods Trade Balance and Pending Home Sales, and Canada’s Q1 Current Account. A busier day for central bank speakers has a good number of Fed speakers, though all have spoken very recently, while South Africa’s SARB is seen holding rates, as the results of yesterday’s general election start to trickle in. Italy holds its end of month auction of 5 & 10-yr BTPs and CCTs (FRNs).

** Spain – May HICP **

– Spanish HICP echoed yesterday’s German reading, coming in as expected at 0.2% m/m, but rising slightly more than expected to 3.8% from April’s 3.4%, and as with the German rise unfavourable base effects, in Spain’s case from Household energy, accounted for most of the rise. Barring surprises from France or Italy tomorrow, it implies that pan-Eurozone CPI may turn out fractionally higher than expected in y/y terms. But it remains the case that a gentle downtrend will likely resume in June and continue through the summer months, and per se fits with the ECB eschewing back to back rate cuts, but likely cutting rates three times by the end of 2024.

** U.S.A. – Q1 revised GDP, Beige Book **

– While there is plenty of US data today, it is tomorrow’s PCE deflators that are more likely to be the market mover. Be that as it may, the first revision to Q1 GDP is expected to be down to 1.3% SAAR from the preliminary 1.6%, predicated on the already reported downward revisions to March data on inventories, Capital Goods Shipments and Residential Construction Spending. While of interest, they are at best semantic to markets’ fluid and fickle perspectives on the Fed’s rate trajectory, and now rather historical. Yesterday’s Beige Book was mixed, signalling continued growth, but noting that ‘conditions varied across industries and Districts’, and perhaps more importantly “Overall outlooks grew somewhat more pessimistic amid reports of rising uncertainty and greater downside risks.” On inflation it observed that “Prices increased at a modest pace over the reporting period. Contacts in most Districts noted consumers pushed back against additional price increases, which led to smaller profit margins as input prices rose on average.” While on the labour market, it noted “A majority of Districts noted better labor availability, though some shortages remained in select industries or areas. Multiple Districts said employee turnover has decreased, and one noted that employers’ bargaining power has increased. Hiring plans were mixed. Wage growth remained mostly moderate, though some Districts reported more modest increases. Several Districts reported that wage growth was at pre-pandemic historical averages or was normalizing toward those rates.” Markets may however focus more on the comments from Atlanta Fed’s Bostic overnight: “My outlook is that if things go according to what I expect — inflation goes slowly, the labor market slowly and orderly moves back into a sort of a weaker stance, but a stable-growth stance — I’m looking at the end of the year, the fourth quarter, as the time where we might actually think about and be prepared to reduce rates.”