The Week Ahead: Highlights

Europe Preview

Are Shipping Containers Starting to Tell Tariff Story?

By Marco Babic, Econoday Economist

The week in Europe had a few positive surprises, with both the German, French and Italian economies expanding slightly in the first quarter. German consumers were also somewhat more positive in April, but sentiment is still at very low levels. Still, it should come as no surprise that European economies are in a fragile state with the ongoing tariff uncertainty.

Official data for April is starting to trickle in with some reports showing inventories building which could be a sign of stockpiling ahead of the full effects of tariffs, but also due to a slowing economy.

France and Germany report their March trade results on Wednesday and Thursday respectively, which could give early indications of accelerated imports just before US tariffs took effect in April.

In light of that, it's worth looking at shipping container volumes. The preliminary RWI/ISL container volume index fell in March to 135.3 from 137.6 in February, sending the first "alarm signals" due to US tariff policies, according to the institute. The North Range index which tracks German and European port container traffic declined to 112.1 in March from 112.8 in February. In Chinese ports, the index also declined, falling to 154.8 from 157.8.

In the United States, the Port of Long Beach recorded its best quarter on record for container volumes. In March, the port processed 25 percent more volume than March of last year, with imports up nearly 26 percent, with the port attributing the increase to anticipated tariffs.

Other major European indicators next week are manufacturing orders and industrial production in Germany. In February, orders stabilized, but the data is volatile as seen by the 5.5 percent monthly decline. Industrial production fell 1.3 percent in February from the previous month. As with other major economies in Europe, the manufacturing sector remains in contraction as seen by the PMI indexes which, in Germany's case stood at 48.4 in April, below the 50-threshold marking expansion.

The economic situation in Europe remains precarious. Although there are no signs of surging inflation for the time being, trade along with consumer price indexes will be among the most closely watched indicators in coming months.

US Preview

FOMC in Focus

By Teresa Sheehan, Econoday Economist

A light data calendar and virtually no reports that could sway Fed policymakers' views on the economy mean that the focus of the May 5 week is squarely on the Tuesday-Wednesday FOMC meeting.

Will the FOMC remain patient and cautious and leave the fed funds target rate range at 4.25-4.50 percent where it has been since December 2024? Or will signs that disinflation has resumed persuade them to cut rates?

Most analysts look for no change in rates when the FOMC releases its statement at 14:00 ET on Wednesday. While a rate cut is unlikely, it is possible that there may be some divergence of opinion among FOMC participants. A dissent in the meeting vote on rates could happen and could signal that sentiment among policymakers is starting to shift. However, that would also require that the data related to maximum employment and price stability continue to improve. Given the disruptions in the US economy at present, it may take some time for the shocks to pass through the numbers and the underlying picture to emerge.

Despite surprisingly good numbers for job separations and hiring through April, some of this may be due to an influx of skilled workers that businesses are snapping them up while the labor market is less competitive and workers are more concerned about job security. Layoff plans are widespread across industries, not just a few narrow sectors like government and technology. Layoff plans often include eliminating open jobs as well as cutting current payrolls and may stretch out over a period of weeks or months. A surge in layoff intentions doesn't necessarily lead to an immediate jump in unemployment which seems to be the current situation. However, it also means less hiring in the future. Fed policymakers will be taking a wait-and-see approach regarding the mandate for maximum employment.

The Fed's preferred measure of inflation is the PCE deflator. The data for March offer some initial encouragement that disinflation is resuming. Still, this is only through March and the effects of chaotic changes in tariff policy mean that it could be a few months before the full impact is known. Learning just how much and where price increases will pass through could take time. Some businesses will be stuck with existing supplier contracts that will mean hard choices about profitability and customers' willingness to pay more. Some businesses will be scrambling to try to contain costs with alternative sources, but other sources may be more costly as well.

Fed policymakers will also have to contend with an unusual and steep increase in inflation expectations in the past few months. It is clear these are driven by businesses' and consumers' uncertainty about future prices. What is not clear is if their concerns are warranted or if this is only a short-term effect. Nonetheless, the FOMC will want to ensure that inflation expectations are anchored. The committee won't want to raise any alarms in that regard, but they will try to communicate their vigilance and defense of their credibility as an inflation fighter.

Asia Preview

China Data to Show Impact of Trade War

By Brian Jackson, Econoday Economist

The Asia-Pacific data calendar will be watched closely in the week ahead for more evidence of the impact of the escalation of trade tensions and market volatility on conditions and sentiment across the region in April. Manufacturing PMI surveys released this week for China, South Korea and Taiwan have already shown a significant impact. PMI surveys for the services sector in China and India and the aggregate economy in Hong Kong and Singapore are scheduled for publication next week.

Both China and Taiwan will also publish trade data for April next week. South Korea trade data published over the last week showed some evidence that the escalation in trade tensions at the start of the month has impacted export performance. Although the South Korean data showed a year-over-year increase in exports in April, exports fell when adjusted for the number of working days in the month. The data also showed exports to the United States fell by 6.8 percent on the year, offset by a 3.9 percent increase in exports to China. China and Taiwan are also scheduled to publish inflation data for April next week.

The Week Ahead: Econoday Consensus Forecasts

Monday

United States PMI Composite Final for April (Mon 0945 EDT; Mon 1345 GMT)

Consensus Forecast, Composite Index: 51.2

Consensus Range, Index: 51.2 to 51.2

No revision is the call from 51.2 in the April flash, down from 53.5 in March.

United States PMI Services Final for April (Mon 0945 EDT; Mon 1345 GMT)

Consensus Forecast, Services Index: 51.4

Consensus Range, Index: 51.4 to 51.4

The consensus looks for no change from 51.4 in the April flash, down from 54.4 in March.

United States ISM Services Index for April (Mon 1000 EDT; Mon 1400 GMT)

Consensus Forecast, Index: 50.2

Consensus Range, Index: 49.5 to 50.6

The consensus looks for the index to edge down to 50.2 in April from a similarly flat 50.8 showing in March. A sub-50 reading would indicate actual contraction in business activity, along the lines of the ISM manufacturing index that came in at 48.7 in April.

Tuesday

China PMI Services for April (Tue 0945 CST; Tue 0145 GMT; Mon 2145 EDT)

Consensus Forecast, Services Index: 51.8

Consensus Range, Services Index: 50.7 to 51.8

Forecasters see the services index pretty stable at 51.8 in April versus 51.9 in March.

France PMI Composite Final for April (Tue 0950 CEST; Tue 0750 GMT; Tue 0350 EDT)

Consensus Forecast, Composite Index: 47.3

Consensus Range, Composite Index: 47.3 to 47.3

Consensus Forecast, Services Index: 46.8

Consensus Range, Services Index: 46.8 to 46.8

No change from the flash at 47.3 is the call for the April composite final, down from 48.0 in March. No change is expected from the flash at 46.8 for services, down from 47.9 in March.

Germany PMI Composite Final for April (Tue 0955 CEST; Tue 0755 GMT; Tue 0355 EDT)

Consensus Forecast, Composite Index: 49.7

Consensus Range, Composite Index: 49.7 to 49.7

Consensus Forecast, Services Index: 48.8

Consensus Range, Services Index: 48.8 to 48.8

No change from the flash at 49.7 is the call for the April composite final, down from 51.3 in March. No change is expected from the flash at 48.8 for services, down from 50.9 in March.

Eurozone PMI Composite Final for April (Tue 1000 CEST; Tue 0800 GMT; Tue 0400 EDT)

Consensus Forecast, Composite Index: 50.1

Consensus Range, Composite Index: 50.1 to 50.1

Consensus Forecast, Services Index: 49.7

Consensus Range, Services Index: 49.7 to 49.7

No change from the flash at 50.1 is the call for the April composite final, down from 50.9 in March. No change is expected from the flash at 49.7 for services, down from 51.0 in March.

United Kingdom PMI Composite Final for April (Tue 0930 BST; Tue 0830 GMT; Tue 0430 EDT)

Consensus Forecast, Composite Index: 48.2

Consensus Range, Composite Index: 48.2 to 48.2

Consensus Forecast, Services Index: 48.9

Consensus Range, Services Index: 48.9 to 48.9

No change from the flash at 48.2 is the call for the April composite final, down from 51.5 in March. No change is expected from the flash at 48.9 for services, down from 52.5 in March.

United States International Trade in Goods and Services for March (Tue 0830 EDT; Mon 1230 GMT)

Consensus Forecast, Balance: -$130.0 B

Consensus Range, Balance: -$145.0 to -$109.5

With the goods trade deficit surging 10 percent on the month to an enormous $162 billion in March on tariff front-running, the consensus for the goods and services gap looks for a widening to $130.0 billion in March from $122.7 billion in February.

Canada Ivey PMI for April (Tue 0830 EDT; Mon 1230 GMT)

Consensus Forecast, Adjusted: 50.2

Consensus Range, Adjusted: 50.2 to 50.5

Index expected at 50.2 versus 51.3 in March.

Wednesday

New Zealand Labour Market Conditions for First Quarter (Wed 1045 NZST; Tue 2245 GMT; Tue 1845 EDT)

Consensus Forecast, Unemployment Rate: 5.3%

Consensus Range, Unemployment Rate: 5.2% to 5.3%

The jobless rate is seen at 5.3 percent versus 5.1 percent in Q4 as labor market conditions have weakened.

Germany Manufacturing Orders for March (Wed 0800 CEST; Wed 0600 GMT; Wed 0200 EDT)

Consensus Forecast, M/M: 1.0%

Consensus Range, M/M: 0.3% to 2.1%

Orders are seen up 1.0 percent on the month after no change on the month in February.

Eurozone Retail Sales for March (Wed 1100 CEST; Wed 0900 GMT; Wed 0500 EDT)

Consensus Forecast, M/M: 0.0%

Consensus Range, M/M: -0.1% to 0.2%

Consensus Forecast, Y/Y: 1.5%

Consensus Range, Y/Y: 1.5% to 1.9%

Sales are expected flat on the month and up 1.5 percent on year in March after rising 0.3 percent on the month and 2.3 percent on year in February.

United States FOMC Announcement (Wed 1400 EDT; Wed 1800 GMT)

Consensus Forecast, Change: 0 bp

Consensus Range, Change: 0 bp to 0 bp

Consensus Forecast, Federal Funds Rate - Target Range: 4.25% - 4.5%

Consensus Range, Federal Funds Rate - Target Range: 4.25% - 4.5% to 4.25% - 4.5%

Forecasters expect no change. The Fed will keep policy in its current somewhat restrictive stance given inflation concerns.

United States Consumer Credit for March (Wed 1500 CEST; Wed 1300 GMT; Wed 0700 EDT)

Consensus Forecast, M/M: $10.0 B

Consensus Range, M/M: $4.5 B to $22.0 B

The consensus sees credit up a routine $10.0 billion in March after an unusual decline of $0.8 billion in February.

Thursday

Germany Industrial Production March (Thu 0800 CEST; Thu 0600 GMT; Thu 0200 EDT)

Consensus Forecast, M/M: 0.5%

Consensus Range, M/M: -2.6% to 1.0%

Output is expected to rebound by 0.5 percent on the month after falling 1.3 percent in February.

Germany Merchandise Trade for March (Thu 0800 CEST; Thu 0600 GMT; Thu 0200 EDT)

Consensus Forecast, Balance: E 19.0 B

Consensus Range, Balance: E 18.5 B to E20.8 B

The goods trade balance is expected wider at E19.0 billion versus E17.7 billion in February.

United Kingdom BoE Announcement & Minutes (Thu 1200 BST; Thu 1100 GMT; Thu 0700 EDT)

Consensus Forecast, Bank Rate - Change: -25 bp

Consensus Range, Bank Rate - Change: -25 bp to -25 bp

Consensus Forecast, Bank Rate - Level: 4.25%

Consensus Range, Bank Rate - Level: 4.25% to 4.25%

The consensus looks for the BOE to cut rates by 25 basis points to 4.25 percent.

United States Jobless Claims for Week 5/3 (Thu 0830 EDT; Thu 1230 GMT)

Consensus Forecast, Initial Claims - Level: 233 K

Consensus Range, Initial Claims - Level: 230 K to 250 K

Claims seen back down to 233K from a high 241K in the previous week. If claims hold around the new higher level, will give pause about the resilient labor market.

United States Productivity and Costs for First Quarter (Thu 0830 EDT; Thu 1230 GMT)

Consensus Forecast, Nonfarm Productivity - Annual Rate: -0.6%

Consensus Range, Nonfarm Productivity - Annual Rate: -1.8% to 1.6%

Consensus Forecast, Unit Labor Costs - Annual Rate: 5.5%

Consensus Range, Unit Labor Costs - Annual Rate: 4.2% to 6.2%

Productivity is seen down 0.6 percent in Q1 at an annual rate versus 1.5 percent increase in Q4. Unit labor costs are seen rising 5.5 percent after 2.2 percent in Q4.

United States Wholesale Inventories (Preliminary) for March (Thu 0830 EDT; Thu 1230 GMT)

Consensus Forecast, M/M: 0.5%

Consensus Range, M/M: 0.5% to 0.5%

Forecasters see no revision from up 0.5 percent in the flash.

Friday

Japan Household Spending for March (Fri 0830 JST; Thu 2330 GMT; Thu 1930 EDT)

Consensus Forecast, M/M: -0.2%

Consensus Range, M/M: -2.0% to 0.1%

Consensus Forecast, Y/Y: -0.2%

Consensus Range, Y/Y: -1.5% to 0.9%

Japan's real household spending is forecast to have slipped a slight 0.2% on year in March after posting a 0.5% dip in February, its first year-on-year drop in three months, as surging costs for food and other necessities kept consumers frugal amid depressed real wages, trimming purchases of vegetables and fruits. Spending in February would have risen 1.8% if the boosting impact of the Lunar New Year in February 2024 were excluded.

On the month, real average expenditures by households with two or more people are expected to fall a seasonally adjusted 0.2% after unexpectedly soaring 3.5% in February, partially rebounding from the 4.5% plunge the previous month.

Canada Labour Force Survey for April (Fri 0830 EDT; Fri 1230 GMT)

Consensus Forecast, Employment - M/M: 12K

Consensus Range, Employment - M/M: 10K to 15K

Consensus Forecast, Unemployment Rate: 6.8%

Consensus Range, Unemployment Rate: 6.7% to 6.8%

Employment is expected up by a modest 12,000 after dropping by 33,000 in March. That is not enough to prevent an uptick in the jobless rate to 6.8% from 6.7%.