Macroeconomics: The Week Ahead: 24 to 28 March 2025

The Week Ahead – Summary preview:  

The new week brings quarter end and the usual run of end of month surveys: G7 flash PMIs, Germany’s Ifo and US Consumer Confidence, as well as some major data in the US (Personal Income/PCE and Durable Goods Orders) and the UK (CPI, Retail Sales and Trade), Japan’s Tokyo CPI, French and Spanish prov. HICP, German Unemployment, Australian CPI and Canada monthly GDP. The UK has its Spring Budget and accompanying OBR forecast update and DMO 2025/2056 mandate. There are numerous central bank speakers, while rate decisions in Norway, Czechia, Hungary and Sri Lanka are expected to see rates unchanged, while Banco de Mexico is forecast to cut rates by a further 50 bps to 9.0%. The US and Russia will hold talks about the war in Ukraine hosted by Saudi Arabia at the start of the week, the new German grand coalition govt is set to take office, and the CBO will publish its estimate of when the US Treasury will hit the debt ceiling. There will be anticipation about further details on China’s plan to stimulate its domestic economy, with a series of major annual conferences including the Beijing China Development Forum, and the Boao Forum for Asia 2025 (aka China Davos). A light week for US and European corporate earnings, but a very busy week in China, where BYD, Chalco, CITIC, CNOOC, ICBC, Jiangxi Copper, PetroChina and Sinopec will be among the highlights. In the commodities sector the FT Global Commodities Summit, Germany’s Petersberg Climate Dialogue and China’s Clean Energy Expo feature in conference terms, and monthly USDA livestock reports are due alongside Brazil’s Unica Sugar S&D report.

– Surveys: Flash PMIs get the week underway, with downside risks for Manufacturing readings from tariff war fears, having already impacted in India in February and potentially weighing again, while Japan’s Manufacturing has meandered just below the key 50.0 level for many a month, though in both cases Services readings showed some strength in February. Of particular note in the Eurozone will be how much the tariff factor is offset by growth optimism due to Germany’s sharp about turn on defence and infrastructure spending, though median forecasts for Manufacturing see only a modest uptick, with readings remaining deep in contraction territory. By contrast, Eurozone Services PMI have signalled modest expansion, with the very notable exception of France. Readings for the UK anticipate a still very sluggish, but a slightly improved Manufacturing PMI, and no change for Services at 51.0. In the US Manufacturing is seen giving back some of the unexpected burst higher since the turn of the year (51.8 vs. prior 52.7), and no change for Services (51.0). Germany’s Ifo will also be something of a litmus test, with the headline Business Climate seen rebounding to 86.8 (vs 85.2), paced unsurprisingly by a jump in Expectations (87.9 vs. prior 85.4). The week ending Eurozone EC confidence surveys are expected to confirm the fall in advance Consumer Confidence, but see a modest rebound in Industrial and Services indices.

– U.S.A.: markets took some comfort from last week’s FOMC meeting, above all Powell’s press conference, but a close look at the updated projections saw PCE deflator and unemployment forecasts revised higher, and inflation risks seen skewed to the upside, while 4 FOMC members dialled back their rate cut forecasts to 25 bps from 50 bps. That was not quite enough to shift the median ‘dot plot’ for 2025, but points to an increasingly hawkish bias. Tuesday brings an update on how consumers are reacting to Trump’s ‘no pain, no gain’ mantra and the chaos of his policy announcements via way of Consumer Confidence, which has already given back the September through November jump to 112.8, with the consensus looking for another drop from 98.3 to 93.6, which would be the weakest reading since January 2021 (ironically the end of Trump’s first term). While the focus will be on Friday’s PCE deflators in terms of hard data, Thursday’s advance Goods Trade Balance and Wholesale Inventories demand attention, the former expected to show a snapback in the deficit to $-135.5 Bln from January’s record $-155.6 Bln as ‘tariff dodging’ imports ebb, while Wholesale Inventories are expected to jump 1.0% m/m. If correct this should see some improvement in the Atlanta Fed; GDPnow tracker for Q1 from the current -1.8% (SAAR). As importantly, it implies that the impact of tariffs on inflation will likely be delayed with retailers and wholesalers well stocked, and doubtless hoping that some tariffs will prove to be ‘transitory’ before they are forced to pass through increased costs. Despite better than expected CPI and PPI readings, Friday’s PCE deflators are expected to see headline rise 0.3% m/m, and core 0.4% m/m, with pressures in financial services (evident in PPI), goods and healthcare more than offsetting downward pressure elsewhere, with y/y headline unchanged at 2.5%, and core ticking up 0.1 ppt to 2.7%. New and Pending Home Sales, FHFA and CoreLogic CS House Prices, and final Michigan Sentiment are also scheduled.

– U.K.: A potentially key week for the UK has Wednesday’s CPI and Spring Budget forecasts as its focal point. CPI is forecast to show a seasonally typical 0.5% m/m rebound, which would see headline, core and Services y/y rates edge down 0.1 ppt to 2.9%, 3.6% and 4.9% respectively, still uncomfortably high for the BoE’s MPC, even if the upward pressures are almost wholly due to energy and other administered price pressures (and on which rates have little or no impact). The latter are set to persist until the end of Q3, with CPI peaking at 3.8%, and thereafter likely to drop quite sharply back towards target. The fact that publication of PPI data has been suspended due to data quality issues (also seen in labour indicators) is not only a matter of acute embarrassment for a G7 country, but also leaves political and monetary policymakers fumbling in the dark. Chancellor Reeves has already said that she will be announcing spending cuts to meet fiscal targets, including around 10,000 layoffs and 15% cost cuts in the Civil Service. It is expected that the OBR will revise its GDP forecasts down (halving its prior estimate of 2.0% for 2025 GDP), resulting in an upward revision of £17 Bln to govt borrowing requirements, which implies the need for Reeves to cut spending by a further £10 Bln to restore some modest fiscal headroom. Given that many govt departments are already heavily constrained, the additional cuts are likely to make for even more tensions within the ruling Labour Party. The UK DMO (Debt Management Office) remit for the 2025/26 will also be closely watched, both in terms of the size of overall issuance (set to rise vs. 2024/25) and any shifts in the maturity structure (hopefully lowering long dated sales, in proportionate terms). Friday is expected to see Q4 GDP unrevised at 0.1% q/q, with the Q4 Current Account widening to £-24.5 Bln from Q3 £-18.1 Bln, while Retail Sales are likely to see a mean reversion from the unexpected 2.1% m/m jump in January with a drop of -0.5% m/m, and delayed Trade data to see a largely unchanged Visible deficit of £-16.7 Bln. While there has been some speculation about Reeves potentially facing a ‘Truss/Kwarteng moment’, it should be remembered that the latter was above all driven by the seismic shift in LDI related hedges, a risk which has to a large extent now been mitigated.

– Eurozone: Outside of the run of surveys, this week also has the first batch of national March CPI readings and M3 & Private Sector Credit, though neither are likely to be genuine game changers for ECB policy, given that ECB policymakers are more focussed on the implications and impact of tariff wars, and the prospect of rising govt borrowing for defence and infrastructure spending, and an accompanying risk to so-called “peripheral” govt debt spreads. Be that as it may French HICP is expected to see upward pressure from VAT on gas and electricity, and unfavourable base effects, with the consensus looking for 0.4% m/m, pushing headline HICP up to a still subdued 1.3% from 0.9%. By contrast Spanish HICP is forecast to post a seasonal jump of 0.9% m/m, which thanks to energy (utilities) price base effects would see y/y drop to 2.6% y/y from 2.9%. French Consumer Spending and German Unemployment are also due. While much feted, the passage of the debt brake reform in Germany is really only half the challenge for the new ‘grand coalition’ (regardless of Constitutional Court challenges). Without very radical reforms to its planning laws and processes at federal, state and municipal levels, most of the increased spending could easily end up being squandered on administration and bureaucracy – just look up reports on the disasters that were the ‘new’ Berlin Brandenburg Airport, Hamburg’s Elbphilharmonie concert hall and “Stuttgart 21” railway station, or the Federal Audit Office (Bundesrechnungshof) estimates of the hundreds of billions of Euros wasted on the Energy Transition – the myth of German ‘efficiency’ really has long been debunked.

– Elsewhere: Japan’s Tokyo CPI is unlikely to stir much in the way of markets’ animal spirits, with all measures expected to be unchanged vs. February at 2.8% y/y (headline), 2.2% (ex-Fresh Food) and 1.9% y/y (core). Australia’s February monthly CPI will need to undershoot expectations of an unchanged 2.5% y/y headline and 2.8% y/y on core (Trimmed Mean) to encourage the RBA to initiate rate cuts at its April meeting rather than May, when it will have its preferred quarterly CPI readings to hand. Given tariff wars with the US, and PM Carney calling a general election for April 28, it is very unlikely that this week’s Canada January monthly GDP will generate much market reaction, with forecasters looking for a healthy 0.3% m/m 2.1% y/y.

– Geopolitics: there is no longer a Hamas Israel ceasefire, and there has been no energy and infrastructure ceasefire between Russia and Ukraine. Over the weekend the retard (I am being generous) that Trump has appointed as the ‘Special Envoy to the Middle East’ Steve Witkoff (a real estate developer by profession) opined: “I don’t regard Putin as a bad guy…. He’s super smart”. He went on to regurgitate Kremlin propaganda: “The elephant in the room is, there are constitutional issues within Ukraine as to what they can concede to with regard to giving up territory. The Russians are de facto in control of these territories. The question is: will the world acknowledge that those are Russian territories?” He added: “There’s a sensibility in Russia that Ukraine is just a false country, that they just patched together in this sort of mosaic, these regions, and that’s what is the root cause, in my opinion, of this war, that Russia regards those five regions as rightfully theirs since World War Two, and that’s something nobody wants to talk about.” When asked about UK PM Starmer’s  “coalition of the willing” to provide security guarantees for a post-war Ukraine, he said  “I think it’s a combination of a posture and a pose and a combination of also being simplistic. There is this sort of notion that we have all got to be like [British wartime prime minister] Winston Churchill. Russians are going to march across Europe. That is preposterous by the way. We have something called Nato that we did not have in World War Two.” I would exhort Mr Wirkoff to go to Warsaw, Vilnius, Riga or Tallinn, let alone Kyiv, Kharkiv or Lviv and repeat this stupidity at a public forum or to local media outlets. Perhaps he is a leftover ‘sleeper agent’ of the former Soviet Union, when Putin was a KGB foreign intelligence officer for 16 years. More seriously, one cannot help but conclude that at the root of the Trump/Putin ‘bromance’ is to try and drive a wedge between Russia and China, something which Nixon also attempted to do, though he was focussed on improving US China relations. Nixon had no success, nor will Trump, the Sino-Russian relationship is spectacularly complex, frequently opportunistic, both cordial and hostile, and even a surface understanding requires a deep understanding of its history over many centuries.

– There are just five S&P 500 companies reporting this week, with worldwide highlights as compiled by Bloomberg News likely to include: Bank of China, BOC Hong Kong, BYD, China Citic Bank, China Life Insurance, China Merchants Bank, China Pacific Insurance Group, China Telecom, Cintas, Citic, Citic Securities, CNOOC, CRRC, Great Wall Motor, Haier Smart Home, Industrial Bank, Kuaishou Technology, Lululemon Athletica, Midea Group, Nongfu Spring, Paychex, People’s Insurance Group of China, PetroChina, PICC Property & Casualty, Postal Savings Bank of China, SF Holding, Shanghai Pudong Development Bank.