Macroeconomics: The Week Ahead: 24 to 28 May 2021

  The new week’s schedule sees a mix of hard data and surveys, with the US looking above all to Durable Goods, Consumer Confidence and advance Goods Trade Balance. Japan has Tokyo CPI and Unemployment; Eurozone looks to German Ifo, French HICP and various national and EC confidence surveys; UK has PSNB and CBI Retailing, Australia Q1 CapEx and Construction Output, China Industrial Profits and Brazil IPCA-15 Inflation. On the central bank front, there is another raft of G7 central bank speakers, while monetary policy meetings in New Zealand, South Korea and Indonesia are expected to see rates left unchanged. Politically the EU has a special two day meeting of the EU Council (of leaders), which amongst other things will discuss how to meeting its emissions cuts targets, the pandemic, U.K. and Russia, and there is also a meeting of EU Agriculture Ministers to discuss the very thorny subject of farm subsidies reform. Former aide to UK PM Johnson Dominic Cummings will testify to a parliamentary committee on the government’s handling of the pandemic crisis, which judging by his weekend tweet storm will be less than complimentary. Meanwhile President Biden formally submits his FY2022 Budget request, and the CEOs of major US banks will testify to the Senate Banking & House Financial Services committees. In the commodity space, there are the EU MARS crop bulletin, USDA Crop Plantings, and EIA 914 Oil Production and Petroleum Supply reports, accompanied by a number of major conferences: UBS Oil & Gas, Shanghai SHFE Derivatives and CISA Steel. The US dominates the week’s govt bond auction calendar with $183 Bln of 2, 5 & 7-yr Treasuries, the UK holds a syndicated sale of a new 2039 Index-Linked Gilt, while Italy offers CTZ, BTPei and 5 & 10-yr BTPs, Germany 15-yr and the Netherlands 26-yr. On the corporate earnings front all the major Canadian banks, with Costco, HP, Meituan, Nvidia, Salesforce.com, Toll Brothers, VMware and Xiaomi also likely to be among the headline makers. Monday is the Whitsun/Pentecost holiday in many European countries, while Wednesday is Vesak Day with a number of Asian countries closed.

  Statistically the US dominates a relatively light schedule, with Durable Goods seen posting a solid 0.8% m/m rise and Non-defence Capital Goods ex-Aircraft up 1.0% m/m, but with supply disruptions in focus it will be Shipments (forecast 0.5% m/m) that get particular attention. After jumping a whopping 31.3 pts in 2 months to 121.40, led by a 50.0 pts rise in Current Situation, Consumer Confidence is expected to ease modestly to 117.0, with the Labour Differential (last 24.7 vs. prior 8.0) and 1-yr Inflation Expectations (last unchanged at 6.7) in focus. Q1 GDP is seen revised only marginally to 6.5% from 6.4%, and likely dismissed as historical, with the advance Goods Trade Balance of perhaps greater significance, given that the consensus looks for yet another record deficit of $-92.5 Bln following March’s $-90.6 Bln. New and Pending Home Sales, FHFA & CS House Prices, Personal Income and PCE, and various regional Manufacturing surveys are also due. In the Eurozone, Germany’s Ifo Business Climate and French Business Confidence are likely to echo flash PMIs in signalling continued strength in Manufacturing, while easing of activity restrictions powers a stronger recovery in Services, and these will be of greater relevance than a slew of revised or final Q1 GDP readings. France also has provisional HICP, though only a modest 0.3% m/m rise is forecast, which would edge the y/y rate up to 1.7%, while in Japan Tokyo CPI is forecast to show deflation continues:  headline -0.5% y/y, ex-Food & Energy -0.1%. Australia has two key components of Q1 GDP (due 2 June) with Construction output seen recovering from Q4’s -0.9% q/q to 2.0%, while Private CapEx eases to a still solid 2.1% q/q from Q4’s 3.0%. However, the primary perspective on incoming data remains whether the extent to which it raises or eases market doubts about central bank commitments (above all Fed and ECB) to continuing with ultra-loose policies, and their dismissal of taper talk.

  In pandemic terms, the themes remain the same: a) the contrast between re-opening in in Europe and North America, and tightening activity restrictions in parts of Asia, b) the race to vaccinate to head off the threat from new variants. But it is regulatory tightening and political interventions, be that crypto currencies or commodities, and above all in China, which continue to fuel volatility and exacerbate the continued uncertainty related to the pandemic. While supply chain disruptions are seen as very much a transitory challenge, the reality remains that the logistics managers are clearly very wary of increasing capacity to meet demand, being understandably concerned that if the boost to demand is primarily a case of temporary hoarding to meet pent-up recovery demand, and ebbs sharply thereafter, they will then be forced to idle capacity thereafter.

  As noted Canadian Banks dominate the corporate earnings schedule, with more reports also due from the US retail sector. Bloomberg News identify the following as likely being among the headline makers: Bank of Montreal, Canadian Imperial Bank of Commerce, National Bank of Canada, Royal Bank of Canada and Toronto-Dominion Bank; other companies reporting include: Agilent Technologies, Autodesk, AutoZone, Avon Rubber, Best Buy, Costco, Dell, Dollar General, Dollar Tree, HP, Intuit, Kuaishou Technology, Marks & Spencer, Medtronic, Meituan, Nordstrom, Nvidia, Pets at Home, Salesforce.com, Shaftesbury, Snowflake, SSE, Tate & Lyle, Ted Baker, Toll Brothers, VMware, Workday and Xiaomi.