Week Ahead: FOMC minutes, global PMI rush & UK CPI/Retail sales

FOMC meeting minutes are released this week for April’s meeting as pressure mounts on Jerome Powell et al to take inflation seriously.

UK CPI data gives an insight into inflation there, while the first batch of post-lockdown retail sales data lets us see if shoppers are heading back to the British high street.

There’s a wealth of PMI data coming from the UK, US, and EU too. How will their economic recoveries compare?

FOMC meeting minutes – is the time act approaching?

We get a detailed look inside the FOMC this week as it releases its minutes for its April meeting.

We know the story now. Despite acknowledging the fact inflation is probably on its way, although rising fuel-led CPI data has shown this is already case, no major tweaks are coming to the Fed’s current policy.

Chairman Jerome Powell is content with letting the economy run hot. Rates remain at near zero. QE will remain in place for the foreseeable at $120bn a month in treasury and agency mortgage-backed securities.

We’ve spoken in the past about what it will take for Powell and Co. to switch things up. According to Powell, three criteria need to be met:

• Effective complete recovery in the labour market
• Inflation reaching 2%
• Inflation running above 2% for a sustainable period of time

Employment might be key here. Eight million Americans are still out of work – although job openings have leapt above that figure. April’s NFP data was not quite as stellar as March’s blockbuster performance either.

The US economy is strengthening. First quarter GDP grew 6.4% year-on-year. We’re not out of the woods yet though, but the momentum is building – maybe it’ll force Powell’s hand in June. For now, the course is steady.

UK CPI shines inflation spotlight on UK economy

We’ll get a taste of the state of inflation in the UK this week with April’s year-on-year CPI data release.

According to May’s Monetary Policy Report, the Bank of England puts current CPI below the Monetary Policy Committee’s (MPC) target of 2.0%. However, we’ve seen indicators that inflation is coming in previous Office of National Statistics (CPI) releases.

March’s ONS CPI reading put the consumer price inflation at 0.7%, compared with 0.4% in February, and rebalancing with the 0.7% level seen in January.

Looking across the year, BoE forecasts think its 2.0% target might be hit by the end of the year. Other commentators have similar outlooks, maybe not hitting the full 2.0% level, but close to it. For instance, National Institute of Economic and Social Research (NIESR) puts year-end CPI at 1.8%, rising to 2.0% by Q2 2022.

Pantheon’s Chief UK Economist Samuel Tombs believes the 2.0% figure will come this month, with April’s printing clocking in at 1.7%. Tombs thinks, because the reading will come after shops have opened, alongside an anticipated semi-annual increase in electricity and natural gas prices, we’ll get a more accurate reading of the state of things.

First post-lockdown UK retail sales data inbound

UK retail sales data for April is coming, following preliminary data published last week.

As to be expected, with lockdown relaxing and non-essential shops open for trading again, initial sales data shows an encouraging spike across April. BRC-KPMG Retail Sales Monitor, overall retail sales in April rose 7.3% against April 2019 (when figures were unaffected by the Covid-19 pandemic).

On a like-for-like basis, sales were up 46%.

« Following the reopening of so-called non-essential stores on 12th April in England and Wales and continued online growth, retail sales enjoyed a welcome boost last month. With the short-term pent-up demand for the shopping experience drawing consumers back to stores, non-food sales across stores and online increased by a quarter between March and April, » BRC Chief Executive Helen Dickinson said.

« Many fashion retailers saw an uptick in sales, particularly in outerwear and knitwear, as the public braved the cold spring weather for outdoor meeting and dining with friends. Furniture also saw a boost as consumers can once again try before they buy, » Dickinson added.

In the three weeks following the first reopening of stores across England and Wales, overall non-food sales in the UK rose 25% against spending levels of seen in March when the lockdown was still in full effect.

Inevitably, the growth rate will slow once the retail segment fully normalises. In the short term though, the sector looks like it’s being buoyed by an expected post-lockdown surge.

Worldwide PMI rush

An avalanche of flash PMI readings are on their way. The EU reports this week, as does the UK and US.

Starting with the EU, the bloc will be hoping to build on April’s forward momentum. Services flash PMI that month hit a nine-month high, with a score of 53.7. Manufacturing was rated at 62.9 according to IHS Markit ratings.

The EU, then, may mirror the course the UK is on: GDP contraction in the first quarter, followed by growth across the year.

Looking to the UK, April saw a record increase in services PMI, reaching its highest level for seven years. March’s reading was 56.3. April’s was 61.0. The partial reopening of the hospitality sector has put it on a growth footing once more, and we may see further growth when venues allow indoor service from Monday.
IHS Markit’s April manufacturing PMI for the UK also showed very strong performance, after nudging record highs. The index rose to 60.9 over 58.9 for March. Growth is back in the sector as orders pick up, but IHS did flag supply chain delays and input issues that could affect ongoing performance.

While the EU and UK look to grow, US manufacturing might be taking a step back. April’s ISM manufacturing PMI data came in at 60.7 – far lower than the expected 65. Supply chain woes are holding the sector back, according to ISM.

We’ll get further information on the economic health of these key industries with the week’s PMI releases.

Major economic data

Date Time (GMT+1) Currency Event
Tue 18-May 2.30am AUD Monetary Policy Meeting Minutes
 
Wed 19-May 7.00am GBP CPI y/y
  1.30pm CAD CPI m/m
  3.30pm USD US Crude Oil Inventories
  7.00pm USD FOMC Meeting Minutes
 
Thu 20-May 2.30am AUD Employment Change
  2.30am AUD Unemployment Rate
  1.30pm USD Phily Fed Manufacturing Index
  1.30pm USD Unemployment Claims
  3.30pm USD US Natural Gas Inventories
 
Fri 21-May 2.30am AUD Retail Sales m/m
  3.00am NZD Annual Budget Release
  7.00am GBP Retail Sales m/m
  8.15am EUR French Flash Manufacturing PMI
  8.15am EUR French Flash Services PMI
  8.30am EUR German Flash Manufacturing PMI
  8.30am EUR German Flash Services PMI
  9.00am EUR Flash Manufacturing PMI
  9.00am EUR Flash Services PMI
  9.30am GBP Flash Manufacturing PMI
  9.30am GBP Flash Services PMI
  1.30pm CAD Core Retail Sales m/m
  1.30pm CAD Retail Sales m/m
  2.45pm USD Flash Manufacturing PMI

 

Key earnings data

Date Company Event
Mon 17-May Bridgestone Q1 2021 Earnings
  Ryanair Q4 2021 Earnings
 
Tue 18-May Walmart Q2 2022 Earnings
  Home Depot Q1 2021 Earnings
  Vodafone Q4 2021 Earnings
  LG Corp Q1 2021 Earnings
  Take Two Q4 2021 Earnings
  Tata Motors Q4 2021 Earnings
 
Wed 19-May Cisco Q3 2021 Earnings
  Lowe’s Q1 2021 Earnings
  JD.com Q1 2021 Earnings
  Target Q1 2021 Earnings
  Analog Devices Q2 2021 Earnings
  Experian Q4 2021 Earnings
 
Thu 20-May Tencent Holdings Q1 2021 Earnings
  Applied Materials Q2 2021 Earnings
  National Grid PLC Q4 2021 Earnings
  Palo Alto Networks Q3 2021 Earnings
  Ralph Lauren Q4 2021 Earnings
 
Fri 21-May Deere & Co. Q2 2021 Earnings