Macroeconomics: The Day Ahead for 15 April

f tariff wars do not jump in front of the proverbial train again, then there is a busy run of data, via way of the overnight UK labour market and BRC Retail Sales, while ahead lie Germany’s ZEW survey, Indian CPI and Trade, Canadian CPI and US NY Fed Manufacturing and Import Prices. In event terms, the overnight RBA minutes are followed by the ECB’s Q1 Bank Lending survey, more corporate earnings (Bank of America, Citigroup and Johnson & Johnson), along with the monthly IEA Oil Market Report and the annual EIA Long-term forecasts, the latter following a sharp downward revision (10% plus) to OPEC’s 2025 and 2026 oil demand forecasts, though still leaving OPEC+ expectations well above other demand estimates. Once again markets faced with another US ‘tariff reprieve’, this time for autos, but again this primarily only adds to uncertainty, with the rationale being rather obvious that to build auto and auto parts factories will take time, though ultimately the key aspect is how the supply chains are secured and structured for these factories, and needing to bear in mind that China is very dominant in terms of the global manufacture of intermediate goods (an absolutely critical element withing the auto sector), as well as in the relevant supply chains. According to some industry estimates US auto tariff measures are likely to raise the prices for small cars by something in the region of $2,500 to $4,500, and for large ‘luxury’ vehicles by up to $20,000, which is hardly likely to resonate well with consumers.

** U.K. – April BRC Retail Sales, February/March labour indicators **

– BRC Retail Sales were slightly better than expected at an unchanged 0.9% y/y, though as the BRC noted this actually understates the pick up in demand given Easter timing effects, which acted as a drag. That said the report predates the large increases in administered prices that took effect at the start of April, and there was an additional boost from warmer weather after a rather protracted and miserable winter, per se the uptick in spending may not be sustained. Labour market indicators were mixed, though the more trustworthy elements point to a loosening in labour demand, above all the sharp -78K drop in HMRC Payrolls (even if revisions have tended to be higher for this series), along with a further modest rise in the Claimant Count, both of which contrasted with what looks to be a highly anomalous 201K rise in the discredited LFS Employment measure. Average Weekly Earnings were weaker than expected (5.6% y/y headline, ex-Bonus 5.9%), though accompanying revisions imply that the rebound in wage growth has peaked, rather than signalling a meaningful deceleration. Overall the data leans to making a stronger case for further gradual BoE policy easing, though as noted, it is the impact of the administered price rises and NI increases in April and Q2 as a whole which will be rather more decisive in determining the pace of further BoE rate cuts.

** Germany – April ZEW survey **

– Unsurprisingly given equity and bond market turmoil, ZEW Expectations are expected to collapse to 10.0 from March’s 51.6,  as ever echoing the performance of the Dax, while Current Conditions are forecast to be little changed at a woe begotten -86.8. Some attention will also be given to the ECB Q1 Bank Lending survey, that is expected to see lending conditions continuing to stabilize after 2 years of improvement. As noted previously, this might prompt some of the ECB’s hawks to policy does not need to be eased further, but with financial conditions tightening thanks to the rise in long-term bond yields, and the EUR continuing to soar, they are likely to find themselves in the minority.

** India – March CPI **

– Following on from the unexpected dip in WPI, predicated mostly by a sharp fall in vegetable prices, CPI is forecast to ease modestly to 3.5% from 3.6% y/y, primarily on the back of lower fresh food prices, per se leaving average CPI comfortably below the RBI’s 4.0% target, and by extension opening the door to a further 25 bps rate cut.

** U.S.A. – March Import Prices, April NY Fed Manufacturing **

– Import Prices round off the run of March inflation data, with the drop in oil prices expected to keep headline flat m/m, while the risks look to be to the downside of the forecast +0.3% m/m on the ex-Petroleum measure, given anecdotal evidence that exporters to the US were cutting prices to shift inventories ahead of tariffs. The erratic volatility of the NY Fed Manufacturing survey make this a poor guide to sector trends, even if markets often react to the frequent outliers (relative to forecasts), a modest recovery to -12.5 is expected after a sharp slide from +5.7 to -20.0 in March.

** Canada – March CPI **

– Today’s CPI may be quite decisive for tomorrow’s BoC rate decision, with the mid-February end of sales tax holiday likely to be the key driver of an expected 0.7% m/m rise, edging up both the headline and core CPI y/y rates by 0.1 ppt to 2.7% and 3.0% respectively. The BoC will however be watching the trend in discretionary goods and services prices not impacted by the sales tax fluctuations, which may exercise more downward pressure than expected (particularly travel services), and this may be just enough to tip the balance in favour of another rate cut, though a small majority of surveyed economists look for the BoC to hold rates at 2.75%, also in part dictated by the proximity of the April 28 general election.