Macroeconomics: The Day Ahead for 28 April

Month end is upon us, and as is typical, it brings a raft of statistics ahead of the long May Day holiday weekend in much of Asia, Europe, Africa and Latin America, with the BoJ policy meeting and press conference to digest. Topping the statistical run are Q1 advance GDP prints in many EU countries and Mexico, provisional CPI in France, Spain and Germany, with the latter also looking to Unemployment, while the US has Personal Income and PCE, Q1 Employment Cost Index, Chicago PMI and final Michigan Sentiment, with Canada and Brazil looking to monthly GDP, and India to Infrastructure Industries Output. Outside of the BoJ rate decision, there are expected no change rate decisions in Russia and Colombia, while Switzerland’s SNB hold its AGM. Chevron, Colgate-Palmolive and Exxon Mobil are the headliners for today’s run of US Q1 earnings. With concerns about First Republic Bank still very much extant, the informal meeting of EU Finance Ministers about deposit guarantees will also be in view.

** Eurozone – Q1 advance GDP, national CPI readings **

Eurozone, French, German and Italian GDP are all expected to have expanded 0.2% q/q, while Spain is seen at 0.3% q/q (boosted above all by tourism), and once again avoiding contraction, but hardly indicative of any real growth momentum, and while there appear to be better prospects for Services in Q2, the manufacturing sector looks likely to contract. A mild winter in Western Europe may help to boost the contribution from Construction in some countries, though the axing of tax credit incentive measures in Italy during Q1 may weigh on Fixed Capital Formation, which has been a pillar for growth over much of the past two years. As for national CPI readings, energy price base effects and changes to utility, gasoline and other subsidies will again result in quite sharp differences in m/m rates in Germany (exp. 0.8%), France (exp. 0.4%) and Spain (exp. 0.4%) HICP, but y/y rates in Germany (7.8%) and France (6.7%) are seen unchanged, and Spain is expected to rebound from 3.1% to 3.9%. Given that services will remain very sticky and Food Prices continue to see upward pressure from input costs, the data will likely reinforce expectations of a further 50 bps hike at next week’s ECB council meeting.

** U.S.A. – March Personal Income/PCE, Q1 Employment Cost Index **

While yesterday’s weaker than forecast Q1 GDP (above all due to a sharp 2.3 ppt drag from inventories, and a weaker than expected contribution from Net Exports) largely pre-empts today’s March Personal Income & PCE report, the deflators will still be closely watched. These are expected to echo CPI with a 0.1% m/m on headline implying a further sharp y/y drop to 4.1% from February’s 5.0%, but core is seen up 0.3% m/m, with the y/y rate only edging down 0.1 ppt to 4.5%, and a slight upside risk given the higher than expected 4.7% SAAR pace seen in the GDP report, and in any case still uncomfortably high for the Fed, above all the fact that core inflation is only easing at a very modest pace.