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Macroeconomics: The Day Ahead for 10 May


There will be a singular market focus on US CPI, though there is plenty of overnight data to digest; South Korea Unemployment, Norwegian CPI, Swedish activity indicators, German final CPI, and ahead lies Italy Industrial Production and US Treasury Budget. The day’s run of central bank speakers (mostly European/UK) will be primarily focussed on financial stability, which may get rather more attention than usual, given the concerns around the US banking sector, with rates seen on hold in Romania. Govt bond supply is plentiful, with the UK selling 10-yr, Germany 27 & 30-yr and the US 10-yr. Europe will be the focal point for corporate earnings, with the likes of ABN AMRO Bank, Credit Agricole, E.On, HeidelbergCement, Telecom Italia, TUI and Vestas reporting, while across the pond the spotlight on Walt |Disney and Brookfield Asset Management.

** U.S.A. – April CPI **

CPI is expected to see headline rise 0.4% m/m to leave the y/y rate unchanged at 5.0%, and core to rise 0.3% m/m to push the y/y rate down to a still stubbornly high 5.5% from 5.6%. Headline will be pressured higher by gasoline prices (though that will be reversed in May), even though the overall energy price gain will be tempered by the drop in NatGas prices. Core goods prices will likely see some upward pressure on car prices, and indeed other household goods prices as retail inventories are now better balanced, and retailers less willing to offer discounts. As for core services, much will depend on OER (rents), which should start to act as a drag, after a protracted period of upward pressure. Any assessment of an upward surprise on CPiI will have to consider both the likelihood of a reversal in May (due to energy prices and easing housing pressures) and of course tightening credit conditions.


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