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The global economy is backpeddling and on the defensive going into what appears to be a strategic pivot toward deeper cross-border troubles. The first indications on the month of May point to extended slowing for global manufacturing with signs of spillover into other sectors perhaps appearing. But not all the news is glum. There are positives the greatest of which is this year's global downshift in monetary policy. This is where we will begin this week's rundown, first with the Reserve Bank of Australia which has all but promised an oncoming rate cut and ending with the Federal Reserve which may be sounding neutral while balancing, however, a set of risks that could increasingly favor the first cut for the US of the expansion.
 The Reserve Bank of Australia has been signaling action for weeks now and a dovish tilt was evident at its April meeting when officials judged that downside risks to the global economy and the outlook for domestic consumption had increased, prompting them to lower their near-term growth forecasts. Yet the meeting produced no change in the policy rate, which was left at a record low of 1.50 percent, and they again concluded that policy settings were consistent with sustainable growth and achieving their inflation target over time. This rate was last changed in August 2016 when it was cut by 25 basis points.
The outlook for the labour market was a major concern of the policy discussion with officials concluding that a reduction in policy rates, given the weakness in inflation, would likely be warranted if labour market conditions weakened or even remained stable in coming months. In a speech delivered soon after the release of the minutes, RBA Governor Philip Lowe provided a more explicit signal that rates will be cut at the next meeting early June, noting that this would support employment growth and return inflation to its target level sooner. Headline CPI inflation has now been below the RBA's 2 to 3 percent target range for three consecutive quarters and is at its lowest level since late 2016.
 Minutes from the European Central Bank's April meeting also hint at an increasing sense of caution about the state of the economy. Chief Economist Peter Praet was at pains to emphasize the importance of preserving the ECB's accommodative stance for as long as necessary for growth to regain a faster pace and give inflation a lift. More generally, it was acknowledged that there was now somewhat less confidence in the bank's baseline scenario and that the range of other possible outcomes had widened.
In particular, Council members noted the persistence of uncertainties related to geopolitical factors, the danger of protectionism as well as vulnerabilities in emerging markets. The threats from Brexit and protectionism were seen as having the potential to further affect confidence and negatively spill over to economic activity. Against this backdrop, the downside risk bias to the economic forecast was retained. But in an offset (and underscoring how events have since changed) it was pointed out that a recovery in China and the avoidance of a "no-deal" Brexit should imply an improvement in the risk balance. For now, ECB policy seems to be set through year-end but staff projections are coming out at the June 6th meeting and will help to set market sentiment about what happens next.
 Much like the ECB, neutral is the expectation for the Federal Reserve though Jerome Powell, in his May 1st press conference, argued that moderation underway in core inflation was transitory. The financial markets at the time took Powell's comments as hawkish and minutes from the meeting confirm that most of the committee saw a greater chance that inflation would move up than it would move down. And in an echo of the ECB, this view boosted by the perception at the time that global risks and uncertainties had moderated.
Since the Fed's last rate hike in December 2017 (0.25 percent higher to 2.375 percent), the Fed's theme has been "patience", a word that has been repeated and repeated to underscore what policy makers see as a sustained period of no action. But arguing in the long term, hawks at the meeting warned that rates would eventually have to move higher if the economy evolved as expected while doves said resource utilization, despite a low unemployment rate, would likely still be slack. What action the Fed will eventually take, whether a rate cut as many expect or a rate hike which few expect, will depend on the unfolding of economic events, which is where we turn next.
 A global set of mid-month purchaser surveys poured in last week and the net theme is clear: slowing rates of growth with blame pinned on global trade. Results for the US samples came in well below expectations. Manufacturing is immediately impacted by trade issues and this PMI fell to 50.6 and a 2-point loss with new orders posting their first sub-50 contractionary result since August 2009 and the last recession. Demand sank for both domestic and foreign orders. The PMI for services fell to 50.9, a 2-point loss and a 3-year low. Growth in orders also slowed in this sample. Overall confidence is now at a 7-year low for these samples with overall job growth at a 2-year low. These results are certain to pull down forecasts for the coming ISM reports on manufacturing and non-manufacturing, the former trending down toward 52 in prior reports and the latter trending down toward 55.
Interestingly, troubles tied to the grounding of the Boeing 737 Max weren't cited in May's samples. What is unfolding for the 737 orders is unknown though some are warning of a major setback for orders in the coming. In data for April posted in the week, US durable goods orders also showed no visible effect from 737 cancellations, at least yet. Nevertheless, the report was very weak and included a sharp and very unexpected 0.9 percent fall, made worse by a sharp downward revision, to core capital goods orders (nondefense ex-aircraft) in declines that will hold down forecasts for second-quarter business investment.
 The sub-50 showing for new orders in the US points to the near-term risk of sub-50 scores for the manufacturing index itself. The manufacturing PMI in Japan has been just south of 50 most of this year, at 49.6 in May vs 50.2 for April. Respondents cited renewed US-China trade tensions and the upcoming sales tax increase as factors weighing on activity and sentiment. New orders and output fell for a fifth consecutive month and at a faster pace than in April, while new export orders were down again though at a slower pace. Employment growth slowed and the 12-month outlook for output turned negative for the first time in more than six years. Japanese machinery orders were also posted in the week in data for March. Orders excluding volatile items rose 3.8 percent on the month, accelerating from February's 1.8 percent rise and much stronger than expectations. Yet this acceleration earlier in the year, however, was never evident in the PMI sample which in contrast hasn't been signaling much strength at all.
 Posting frightful scores in the 44s, the face of the global manufacturing slump right now is the German PMI. At 44.3 in May, the index fell a tick from April to indicate that this manufacturing sample is firmly mired in recession. New orders fell back into contraction in May with export sales continuing to decline sharply though at a slightly lower rate. Backlogs for this sample have fallen in each of the last seven months. In contrast the report's services counterpart, at 55.0, signaled another solid increase in composite growth but at a rather slower rate than April's 55.7. Against this backdrop, overall business confidence in the year ahead deteriorated to a 55-month trough. Ominously too, within this, services declined to their softest point in more than 3-1/2 years.
Other data out of Germany in the week were mixed. Updated first-quarter GDP figures were surprisingly impressive, with healthy performances by all of the key elements of private sector demand to indicate that the German economy was in a much better shape than first thought at the start of 2019. But that's old new. In results for May, the Ifo proved surprisingly poor. At just 97.9, the overall business sentiment index fell 1.3 points vs April and well below consensus. It was also the weakest reading since November 2014 in a report that was even more downbeat than the PMIs.
 There are similar signs of trouble coming out of the UK this month. The CBI's latest trends survey suggests that the recent pick-up in manufacturing activity may be running out of steam. At minus 10 percent, the headline orders balance was surprisingly soft in May and 5 percentage points short of April's already subdued reading and the weakest outturn since October 2016. Moreover, within this, the export component fell 11 points to minus 16 percent for its worst mark since July 2016. Output over the last three months improved but a marked slowdown is anticipated during the coming quarter. Brexit worries were reflected in stocks of finished goods which hit their highest level since May 2009. Expected prices were again little changed but still touched a 3-year trough.
 Yes manufacturing may be slumping, but not all the news this month is bad. Business sentiment in France's manufacturing sector unexpectedly improved in May. At 104, INSEE's headline index was up 3 points versus April for its highest level since November 2018. It now stands 4 points above its long-run average. The more optimistic assessment reflected stronger past activity and a decent bounce in order books as well as a more positive outlook. Personal production expectations were up 7 points at 13, fully reversing April's decline, while general output expectations advanced 6 points to 4, the first positive reading in six months.
 Falling into contraction, US retail trade data for April were some of the lowlights of the prior global week with UK data out in the latest week not much better. Based on the CBI distributive trades survey, retailers had a terrible time in May. At minus 27 percent, the balance of respondents reporting a decline in volume sales from a year ago was some 40 percentage points below April, miles short of both market and the CBI's own expectations and the weakest level since October 2017. Worse still, sales for the time of year, normally seen as the best guide to underlying developments, came in at minus 40 percent, their lowest mark since 2009. Similarly, the volume of orders placed on suppliers slumped to minus 41 percent from 13 percent in April. The only sub-sector to post a rise in sales was non-store retailing. Recreational goods volumes were flat, while the other sub-sectors all contracted. CBI's message continues to underscore worries about Brexit and this lack of confidence in future demand is reflected in year-ahead investment intentions which declined to a record low.
 The further unfolding May data will be interesting to watch given the far reaching implications of the developing breakdown in US-Chinese trade relations. For the US, the biggest news on May will come out on Friday, June 7th with the monthly employment report. The first major indication on how this report will turn out is mixed to soft. Initial unemployment claims have been low this month but not quite as low as April. Claims in the May 18 week, which was the sample weekly for the May employment report, fell 1,000 and at 211,000 were near the low end of Econoday's consensus range. The 4-week average was also down, 4,750 lower at 220,250. Yet comparisons with the reporting week for the April employment report show a sizable 18,000 rise at the headline level and an 18,750 rise for the 4-week average. However low claims data are, they're not as low as they were during the historic lows of April, and it's this comparison that points to an easing of strength, however limited, in this month's US labor market.
 Last year was a poor one for the global stock markets which burst higher and then slumped badly after the Federal Reserve tilted its inflation language to the hawkish side in late January that year. This signaled what proved to be a steady run of rate hikes through the year. Indexes in 2018 peaked just before the Fed's meeting as tracked by the Dow and the Shanghai in the accompanying graph. Stocks clawed back to a second peak in late February before the first tariff actions were announced in March that year, putting a cap the market going into mid-year.
 The year-to-date pattern right now also shows a downturn, yet after a strong build higher and one also corresponding with the Fed, in this case its move away from rate hikes and into wait-and-see mode. Trade actions are factors in both years especially now and are holding down both the Dow and Shanghai going into mid-year. Yet as of now, year-to-date scores are much better in 2019, at a 15.7 percent and still robust gain for the Shanghai and a 9.7 percent gain for the Dow. Last year at this time, the Shanghai was down 5.8 percent on its way to a very heavy 25.5 percent full year loss with the Dow unchanged but also on its way to a yearly loss, of 6.0 percent. However much tariffs are hurting and may hurt more, monetary policy is now favorable and may well prove itself to be the big difference between now and then.
Early indications for May have not been favorable. Though only some of this slowing, if any, can be blamed on the initial impact of the US-China breakdown, it does suggest that the global economy was already losing momentum before the trouble started to heat up.
**Jeremy Hawkins and Brian Jackson contributed to this article
A week that opens with a Memorial Day holiday in the US on Monday and that gets rolling on Tuesday with the first look at first-quarter GDP in Switzerland where moderate growth is the expectation. Tuesday's focus then turns to sentiment: Germany's GfK consumer climate index followed by EC economic sentiment and US consumer confidence all in a row. None are expected to show any psychological damage yet from US-Chinese tensions. Wednesday's highlight will come from the Bank of Canada which will issue a policy announcement where no change, in light of global risks, is the strong consensus. Germany's unemployment rate will also be posted on Wednesday while Japan's unemployment rate, which jumped in the last report, will be posted on Thursday. And Thursday will also see monthly Japanese industrial production and retail sales data preceded by advance data on the US goods deficit, all these reports for April. Friday will open with German retail sales where bounce-back strength is the call followed by monthly GDP data out of Canada and April consumer income and spending data out of the US in a report that will update the Federal Reserve's key inflation gauge: the core PCE rate where no change at a subdued 1.6 percent is expected. The week will also see revisions to a host of first-quarter GDP data including from France, Italy and the US.
Switzerland: First-Quarter GDP (Tue 01:45 EDT; Tue 05:45 GMT; Tue 07:45 CEST)
Consensus Forecast, Quarter-to-Quarter: 0.4%
First GDP is expected to rise a quarterly 0.4 percent vs 0.2 percent in the second quarter which came in below expectations.
Germany: GfK Consumer Climate for June (Tue 02:00 EDT; Tue 06:00 GMT; Tue 08:00 CEST)
Consensus Forecast: 10.4
No change at 10.4 is the call for June's GfK consumer climate survey which in May edged past expectations. The May report showed progress for the willingness to buy as well as income expectations, both offsetting a sharp deterioration in economic expectations.
Eurozone: EC Economic Sentiment for May (Tue 05:00 EDT; Tue 09:00 GMT; Tue 11:00 CEST)
Consensus Forecast, Economic Sentiment: 104.0
The European Commission's economic sentiment index has fallen for ten months in a row, losing 1.6 points in April to what was a lower-than-expected and broadly weak 104.0 where it is expected to hold in May.
US: Consumer Confidence Index for May (Tue 10:00 EDT; Tue 14:00 GMT)
Consensus Forecast: 129.8
Consensus Range: 128.0 to 137.2
The consumer confidence index continued to improve in April along with the consumer's assessment of the labor market. Despite the breakdown of US-China trade talks, steady conditions are expected for May where the consensus is 129.8 vs April's 129.2.
Germany: Unemployment Rate for May (Wed 03:55 EDT; Wed 07:55 GMT; Wed 09:55 CEST)
Consensus Forecast: 4.9%
Germany's unemployment rate is expected to hold steady at 4.9 percent in May. Though the rate was unchanged in April, vacancies posted their first fall of the year.
Canada: Bank of Canada Announcement (Wed 10:00 EDT; Wed 14:00 GMT)
Consensus Forecast, Change: 0 bp
Consensus Forecast, Level: 1.75%
No change is the call for the Bank of Canada which is expected to hold its overnight target rate at 1.75 percent. In their last announcement in April, policy makers reiterated that global growth had slowed more than anticipated and that ongoing uncertainty related to trade conflicts had undermined business sentiment and activity.
US: International Trade In Goods for April (Thu 08:30 EDT: Thu 12:30 GMT)
Consensus Forecast, Month-to-Month Change: -$72.0 billion
Consensus Range: -$73.7 to -$71.5 billion
Forecasters see widening in the April goods trade gap to $72.0 from $71.3 billion in March. This report will offer signpost data on where the US deficit stood going into the heated trade tensions of May.
Japan: Unemployment Rate for April (Thu 19:30 EDT; Thu 23:30 GMT; Fri 08:30 JST)
Consensus Forecast: 2.4%
The unemployment rate in Japan is expected to edge lower to 2.4 percent in April vs an unexpected 2 tenths rise in March to 2.5 percent. Yet March's report was still favorable, headlined by a 5 tenths rise in the participation rate to 61.9 percent.
Japan: Industrial Production for April (Thu 19:50 EDT; Thu 23:50 GMT: Fri 08:50 JST)
Consensus Forecast, Month-to-Month: 0.2%
Industrial production is expected to edge 0.2 percent higher in April following a sharp and unexpected 0.9 percent decline in March that reflected weakness for motor vehicles, production machinery and fabricated metals.
Japan: Retail Sales for April (Thu 19:50 EDT; Thu 23:50 GMT: Fri 08:50 JST)
Consensus Forecast, Year-over-Year: 1.0%
At 1.0 percent year-on-year, forecasters see Japanese retail sales in April matching March's 1.0 percent rise which benefited from gains in food and energy.
Germany: Retail Sales for April (Fri 02:00 EDT; Fri 06:00 GMT; Fri 08:00 CEST)
Consensus Forecast, Month-to-Month: 0.5%
German retailers had a weak March but a reversal is expected for April, at a sizable 0.5 percent monthly gain. Strength in domestic demand is key for the German economy as the country's exports are struggling.
Canada: GDP for May (Fri 08:30 EDT; Fri 12:30 GMT)
Consensus Forecast, Month-to-Month: 0.4%
Consensus Forecast, Quarter-to-Quarter annualized: 0.7%
Canadian GDP for May is expected to rise a monthly 0.4 percent vs a 0.1 percent decline in April. GDP for the first quarter is seen at a 0.7 percent annual rate, up from 0.4 percent in the fourth quarter.
US: Personal Income for April (Fri 08:30 EDT; Fri 12:30 GMT)
Consensus Forecast, Month-to-Month Change: 0.3%
Consensus Range: 0.1% to 0.4%
Personal Consumption
Consensus Forecast, Month-to-Month Change: 0.2%
Consensus Range: 0.1% to 0.3%
PCE Price Index, Month-to-Month Change
Consensus Forecast: 0.3%
Consensus Range: 0.2% to 0.3%
PCE Price Index, Year-on-Year Change
Consensus Forecast: 1.6%
Consensus Range: 1.5% to 1.6%
Core PCE Price Index, Month-to-Month Change
Consensus Forecast: 0.2%
Consensus Range: 0.0% to 0.3%
Core PCE Price Index, Year-on-Year Change
Consensus Forecast: 1.6%
Consensus Range: 1.6% to 1.7%
Growth in personal income has been slowing and a pick-up is the forecast for April, at a consensus 0.3 percent monthly gain vs only 0.1 percent in March. Consumer spending (personal consumption expenditures) spiked 0.9 percent higher in March and only a subdued 0.2 percent April gain is the call. Price readings in this report have been very soft but improvement is expected for April with the core PCE index is seen at plus 0.2 percent for the monthly rate, vs no change in March, but holding steady year-on-year at 1.6 percent. The overall PCE index is seen at a monthly 0.3 percent increase with this year-on-year also at 1.6 percent.
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