Key Events This Week: Payrolls, PCE And Politics
Despite it being a holiday shortened week, with both the US and UK off on Monday, it’s still a busy one for data with the latest payrolls report and PCE data in the US the main highlights. Inflation data in Europe will also be closely watched especially with the return of the Italian (and Spanish) political crisis, while final global PMI and ISM revisions, and a second look at Q1 GDP in the US are also scheduled to be released.
Tackling those in order, Deutsche Bank’s Craig Nicol summarizes the upcoming key events, starting with the US employment report due on Friday where the current market consensus for nonfarm payrolls is 190k. As a reminder that follows a softer than expected 164k in April and also a below market 135k reading in March. The average miss in the last two months has been 40k however that did follow a bumper and much stronger than expected 324k reading back in February. Interestingly, the last three May nonfarm payrolls readings have seen a large divergence from the consensus. Last May printed at 155k which was 27k below consensus while in 2016 we had a print of 34k and 126k below consensus. However back in 2015 payrolls beat to the tune of 100k after printing at 326k. Equally, or perhaps more important, will be the average hourly earnings data. The consensus expects a +0.3% mom reading and a +2.7% yoy reading (from +2.6% in April). The unemployment rate is also expected to hold at 3.9% along with average weekly hours at 34.5hrs.
A day prior to the employment report we’ll have the April PCE report in the US. The consensus if for a +0.1% mom reading which would lower the yoy rate to +1.8% yoy from +1.9%. Remember that core CPI in April dissapointed at +0.1% mom (vs. +0.2% expected) although as we’ve seen in May regional reports so far, prices paid components have been a lot more upbeat.
Inflation data in Europe will also be a big focus next week with the May CPI report for the Euro area due on Thursday. Following a seasonally impacted, but albeit softer than expected +0.7% yoy reading in April, our European economists expect the core print to rise back towards +1.0% in May, before rising to +1.3% to +1.4% by Q4 this year.
Also worth watching out for next week is the final May PMI revisions around the globe. It’ll kick start with the official PMIs out of China on Thursday, followed by non-official readings for Japan and China on Friday and final revisions in Europe including a first look at the data for the non-core and UK. The final US reading is also due out on Friday afternoon.
Of course, some of the most market-moving news will come out of Italy, where the ongoing political crisis is suddenly the biggest gray swan impacting the markets, as well as Friday’s vote of no confidence in Spain’s prime minister Mariano Rajoy.
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Away from the data, the central bank calendar is fairly light with the St Louis Fed President Bullard (dovish/non-voter) speaking on Tuesday and Thursday in Tokyo, and Atlanta Fed President Bostic (neutral/voter) speaking in a moderated Q&A in Orlando on Thursday afternoon. Over at the ECB, Villeroy is due to speak on Monday and Tuesday, while Visco, Mersch, Lautenschlaeger and Coeure also speak on Tuesday across the continent.
Other things to look out for next week include EU foreign ministers meeting in Brussels on Monday to discuss North Korea and the Iran nuclear deal developments, the OECD conference kicking off on Tuesday (through to Thursday) with speakers including French President Macron and US Commerce Secretary Wilbur Ross, the Fed discussing changes to the Volcker Rule on Wednesday, G7 finance and development ministers and central bank governors gathering in Whistler from Thursday, and US automakers announcing May sales figures on Friday.
A summary of key events broken down by day, courtesy of Deutsche Bank
- Monday: A very quiet start to the week with the UK and US both off for public holidays. There are no significant data releases scheduled and the only central bank speak of note is that from the ECB’s Villeroy in the morning in Paris. EU foreign ministers are due to meet in Brussels to discuss developments around North Korea and the Iran nuclear deal.
- Tuesday: Overnight, April employment data in Japan is likely to be the focus, while the Fed’s Bullard is due to speak in Tokyo. In Europe we’ve got April money supply data for the Euro area and the May consumer confidence reading in France due. The ECB’s Villeroy is also due to speak again, followed by the ECB’s Visco, Mersch, Lautenschlaeger and Coeure. In the afternoon the main highlight in the US will be the May consumer confidence report, while the May Dallas Fed manufacturing activity index and March S&P/Case-Shiller home price index data are also due. Away from that, the OECD conference is also due to kick off (through to Thursday).
- Wednesday: A busier day for releases, starting overnight with April retail sales and May consumer confidence data in Japan. In Europe we’ll get the flash May CPI report for Germany, along with the preliminary Q1 GDP release in France and May confidence indicators for the Euro area. In the US we’ll get the second revision to Q1 GDP in the US along with May ADP employment change, April advance goods trade balance and April wholesale inventories data. The Fed’s Beige Book will also be out in the evening while the Fed is also scheduled to discuss changes to the Volcker Rule.
- Thursday: Inflation data should be the big focus on Thursday with the May CPI report for the Euro area and April PCE report in the US both due. Away from that, May PMIs in China, May CPI for France and April money and credit aggregates data in the UK are all due in the morning. In the US we’ll also get April personal income and spending reports, weekly initial jobless claims, May Chicago PMI and April pending home sales data. In the morning the Fed’s Bullard will speak in Tokyo again, while in the evening the Fed’s Bostic is due to speak. G7 finance ministers and central bankers are also due to gather in Whistler with the topic of the conference being “Investing in Growth that Works for Everyone”.
- Friday: The focus overnight will be the final May manufacturing PMIs in Japan (Nikkei) and China (Caixin). In Europe the final manufacturing PMIs are also due along with a first look at the non-core and UK, while in the US the week ends with the May employment report including nonfarm payrolls, unemployment rate and average weekly earnings. The final manufacturing PMI for May, April construction spending and May ISM manufacturing prints are also due in the US. Last but by no means least, US automakers are scheduled to release May sales figures on Friday.
Finally, here is Goldman with a detailed breakdown of just US events in the week ahead, together with consensus estimates. The key economic releases this week are the ISM manufacturing and nonfarm payrolls report on Friday. In addition, the Beige Book for the June FOMC meeting will be released on Wednesday, and there are several speeches from Fed officials this week.
Monday, May 28
- Memorial Day holiday. US equity and bond markets are closed.
Tuesday, May 29
- 12:40 AM St. Louis Fed President Bullard (FOMC non-voter) speaks; St. Louis Fed President Bullard will give a speech in Tokyo at the Japan Center for International Finance’s Global Finance Seminar in Tokyo. Audience and media Q&A is expected.
- 09:00 AM S&P/Case-Shiller 20-city home price index, February (GS +1.1%, consensus +0.8%, last +0.8%): We expect the S&P/Case-Shiller 20-city home price index to rise 1.1% in the March report following a 0.8% increase in the prior month. The measure still appears to be influenced by seasonal adjustment challenges, and we place more weight on the year-over-year pace, which firmed to 6.8% in February.
- 10:00 AM Conference Board consumer confidence, May (GS 126.5, consensus 128.0, last 128.7): We expect that the consumer confidence index pulled back 2.2pt to 126.5 in the May report, as other higher frequency measures of sentiment were mixed. The level of consumer confidence remains elevated relative to other sentiment measures, and we expect the index to moderate this month.
- 10:30 AM Dallas Fed manufacturing index, May (consensus 23.8, last 21.8)
Wednesday, May 30
- 08:15 AM ADP employment report, May (GS +190k, consensus +198k, last +241k): We estimate a 190k increase in ADP payroll employment in May, reflecting inputs utilized in the ADP model. While we believe the ADP employment report holds limited value for forecasting the BLS’s nonfarm payrolls report, we find that large ADP surprises vs. consensus forecasts are directionally correlated with nonfarm payroll surprises.
- 08:30 AM GDP (second), Q1 (GS +2.3%, consensus +2.3%, last +2.3%): Personal consumption, Q1 (GS +1.2%, consensus +1.2%, last +1.1%): We look for real GDP growth to be unrevised at 2.3% in the second vintage of Q1 GDP. We expect real personal consumption to be revised up by one tenth to 1.2%, reflecting firmer retail sales revisions and mixed details in the Quarterly Services Survey.
- 08:30 AM U.S. Census Bureau Report on Advance Economic Indicators; Advanced goods trade balance, April (GS -$71.5bn, consensus -$71.0bn, last -$68.3bn); Wholesale inventories, April preliminary (last +0.3%): We estimate the goods trade deficit increased $3.3bn in April to $71.5bn, returning to a more normal level following recent volatility. We note that inbound container traffic also rebounded in the month, probably reflecting the unwind of Chinese New Year distortions.
- 12:30 PM Atlanta Fed President Bostic (FOMC voter) speaks: Atlanta Fed President Raphael Bostic will participate in a moderated Q&A at a conference hosted by the Florida Prosperity Partnership in Orlando, Florida. Audience Q&A is expected.
- 01:00 PM Fed Governor Brainard (FOMC voter) speaks: Federal Reserve Board Governor Lael Brainard will give a speech on the economic outlook and monetary policy at a luncheon hosted by the Forecaster’s Club of New York. Audience Q&A is expected.
- 02:00 PM Beige Book, June FOMC meeting period: The Fed’s Beige Book is a summary of regional economic anecdotes from the 12 Federal Reserve districts. The May Beige Book reported modest-to-moderate growth across all 12 districts, but several sectors raised concerns related to trade policy. Consumer spending grew across most regions though there were pockets of weather-related weakness. Wage pressures continued and prices increased across all districts. In the May Beige Book, we look for additional anecdotes related to the state of consumption, manufacturing activity, price inflation, and wage growth.
- 08:30 PM Dallas Fed President Kaplan (FOMC non-voter) speaks: Dallas Fed President Kaplan will give the keynote address at an event hosted by the Southwestern Graduate School of Banking. Audience Q&A is expected.
Thursday, May 31
- 8:30 AM Personal income, April (GS +0.3%, consensus +0.3%, last +0.3%); Personal spending, April (GS +0.4%, consensus +0.4%, last +0.4%); PCE price index, April (GS +0.22%, consensus +0.2%, last flat); Core PCE price index, April (GS +0.16%, consensus +0.1%, last +0.15%); PCE price index (yoy), April (GS +2.01%, consensus +2.0%, last +2.01%); Core PCE price index (yoy), April (GS +1.86%, consensus +1.8%, last +1.88%): Based on details in the PPI and CPI reports, we forecast that the core PCE price index rose +0.16% month-over-month in April, or 1.86% from a year ago. Additionally, we expect that the headline PCE price index increased 0.22% in April, or 2.01% from a year earlier. We expect a 0.3% increase in April personal income and a 0.4% gain in personal spending.
- 08:30 AM Initial jobless claims, week ended May 26 (GS 220k, consensus 228k, last 234k); Continuing jobless claims, week ended May 19 (consensus 1,720k, last 1,741k): We estimate initial jobless claims declined by 14k to 220k in the week ending May 26 following an 11k increase in the prior week. We suspect auto plant shutdowns may have boosted claims last week, and we expect the level of claims to move down in line with the recent trend. Consensus expects continuing claims—the number of persons receiving benefits through standard programs—to decline by 21k to 1,720k.
- 09:45 AM Chicago PMI, May (GS 59.5, consensus 58.0, last 57.6); Regional manufacturing surveys strengthened in May across the board and we estimate that the Chicago PMI increased by 1.9pt to 59.5.
- 10:00 AM Pending home sales, April (GS flat, consensus +0.5%, last +0.4%); Regional housing data released so far were mixed in April. We estimate pending home sales were flat in April, and we note the current level looks elevated relative to other home sales measures. We have found pending home sales to be a useful leading indicator of existing home sales with a one- to two-month lag.
Friday, June 1
- 8:30 AM Nonfarm payroll employment, May (GS +205k, consensus +190k, last +164k); Private payroll employment, May (GS +200k, consensus +190k, last +168k); Average hourly earnings (mom), May (GS +0.2%, consensus +0.2%, last +0.1%); Average hourly earnings (yoy), May (GS +2.6%, consensus +2.6%, last +2.6%); Unemployment rate, May (GS 3.9%, consensus 3.9%, last 4.1%): We estimate nonfarm payrolls increased 205k in May. Our forecast reflects strong jobless claims data and an improvement in the weather, which we believe weighed on job growth in March and April. After falling two tenths in April, we estimate the unemployment rate remained stable at 3.9%, but we see the risks to this forecast as skewed to the downside, reflecting the sharp drop in continuing claims over the payroll month. Finally, we expect average hourly earnings to increase 0.2% month over month and 2.6% year over year, reflecting unfavorable calendar effects.
- 08:55 AM Minneapolis Fed President Kashkari (FOMC non-voter) speaks: Minneapolis Fed President Neel Kashkari will participate in a panel discussion on “Collaborative Strategies to Build Tomorrow’s Workforce.” Q&A is not expected.
- 10:00 AM ISM manufacturing, May (GS 59.0, consensus 58.1, last 57.3): We estimate a 1.7pt increase in the ISM manufacturing index to 59.0 in the May report. Our forecast reflects broad-based improvements in business activity surveys in April. Overall, our manufacturing survey tracker, which distills the signal from regional manufacturing reports and is scaled to the ISM index, strengthened by 3.1pt to 60.8.
- 10:00 AM Construction spending, April (GS +0.7%, consensus +0.8%, last -1.7%): We estimate construction spending increased 0.7% in April, following a sharp decline in March that reflected weak private single family as well as multifamily construction. Levels were revised up substantially however for January and February, suggesting solid activity at the start of the year but waning momentum to end the first quarter.
Source: GS, BofA, DB