Macroeconomics: The Day Ahead for 15 May

A bumper day for economic data awaits, with UK Q1/monthly GDP and activity indicators, Australian Employment, Norwegian GDP to digest ahead of Eurozone revised and CEE provisional Q1 GDP, and a raft of statistics from the US: Retail Sales, Import Prices, Industrial Production and regional Fed Manufacturing and NAHB Housing surveys. ECB and Fed speakers will again be plentiful, Mexico’s central bank is expected to cut rates a further 50 bps to 8.50%, while the IEA rounds off the run of monthly oil market reports, but oil markets will be more sensitive to US Iranian nuclear talks, which would appear to be near to concluding a deal. President Trump moves onto UAE on his tour of GCC countries, while the much-touted talks between Russia and Ukraine look to be dead in the water, given that Russia is sending an ultra-low level delegation, effectively signalling no real appetite for either negotiations, let alone a ceasefire. Alibaba and Deere & Co top the earnings run, with utilities and grid operator reports perhaps getting more than usual attention after Spain & Portugal’s power meltdown.

** U.K. – Q1 GDP, March activity index indicators **
– Q1 GDP proved to be better than expected at 0.7%, thanks to a stronger than expected 0.2% m/m outturn for March, the latter paced by unexpected strength in the Index of Services (0.4% m/m), paced by Wholesale/Retail and Information/Communication which offset the expected ‘mean reversion’ drag from Manufacturing. A strong positive contribution to Q1 GDP came from Net Exports, as UK auto and machinery manufacturers ramped up exports to the US – see attached chart. There was also a very strong contribution from Business Investment, up 5.9% q/q (again likely tariff pre-emption related), though this series is often heavily revised by the time final data are released. But the Q1 strength, while very welcome, is unlikely to be sustained into Q2, even though the strong BRC Retail Sales reported earlier this week implies potential for better Q2 Personal Consumption, which proved to be a lot weaker at 0.2% q/q than the anticipated 0.5%, even if April’s sharp rise in administered prices will clearly be a headwind.

** U.S.A. – Retail Sales, PPI, Industrial Production & surveys **
– Retail Sales are expected to moderate to 0.1% m/m headline and 0.3% m/m on all core metrics, following the auto led headline surge of 1.5% m/m and robust 0.6% m/m ex-Autos in March, with the fall in gasoline prices tempering gains, though anecdotal evidence suggests consumers continued to try and front-run tariff related price increases, above all for clothing and electronics, though any weakness in spending at restaurants and bars would imply that underlying household consumption is slowing quite sharply. PPI will also see a rebound from March’s negative prints, the question is how much rebounds in pharmaceuticals and goods sensitive to tariffs are offset by a continued fall in airfares (both demand and energy driven) and portfolio management fees (paced by equity sell-off), with headline seen up 0.2% m/m and core 0.3% m/m, though y/y rates would dip 0.2 ppt to 2.5% and 3.1% respectively, if the consensus estimates are correct. Industrial Production (median 0.1% m/m) and Manufacturing Output (-0.4% m/m vs. prior +0.3%) are expected to be sluggish, while May sector surveys are expected to see the very erratic NY Fed measure little changed and the Philadelphia measure rebounding to -10.0 after crashing to -26.4 in April, with the NAHB Housing Market Index expected to be unchanged at 40.0.