Week Ahead Economic Preview: Week of 8 May 2023

The following is an extract from S&P Global Market Intelligence's latest Week Ahead Economic Preview. For the full report, please click on the 'Download Full Report' link.

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BOE meeting, US, China and India inflation figures in view

The upcoming week packs various key data releases, in addition to a monetary policy meeting in the UK. Specifically, inflation figures will be due from the US, mainland China and India while China also updates trade figures from April. Other tier-1 data due includes Q1 GDP numbers from the UK, just as another hike to interest rates is set to take place. Various survey data, including S&P Global Sector PMI, metal users PMI, Investment Manager Index and the GEP Global Supply Chain Volatility Index will also be released next week.

A surprise hike by the Reserve Bank of Australia (RBA) and higher interest rates post the US Federal Open Market Committee (FOMC) and European Central Bank (ECB) meetings this week reflected the continued attention on inflation even as recent easing of supply chain constraints have enabled upstream price pressures to wane. However, the inflation focus has shifted to the service sector, where rising demand has led to increased pricing power in April, according to the early PMI surveys. A key area to watch is therefore whether the latest round of consumer spending, especially on travel, may prove a short-lived boom, as underlying demand fundamentals remain adverse. Further pressure on this end may keep the central bankers on a tightening bias but the recession risks on hand later in the year certainly validates the cautious mood observed in the market.

With a 25-basis point hike already priced in from the Bank of England, it will be the rhetoric surrounding future policy which will be the market's focus. Further clues on the direction that other central banks will take will meanwhile be drawn from the series of inflation figures due in the coming week for the US, mainland China and India. Notably, a further acceleration in US inflation is expected with the April release. The extent to which price inflation picked up, and which categories recorded the fastest increases, will be eagerly watched. This will be complemented by the S&P Global Investment Manager Index, which will shed light on risk appetite, expected returns, market drivers and sector preferences for US equities.

Finally, the GEP Global Supply Chain Volatility Index, a unique supply chain indicator derived from S&P Global PMI surveys, will also be due for April.

How long can consumers keep spending?

One of the big surprises in recent months has been a strong surge in service sector activity led by consumers. The detailed global PMI sector data for March, for example, showed consumer services activity enjoying a strong rebound, outperforming all other sectors. Drill down deeper and the fastest growth area was tourism & recreation, with transportation also booming. The PMI data therefore point to a spike in consumer-led travel spending as the global economy truly opens up after the pandemic. Pent-up savings and better weather have helped, with the easing of COVID-19 restrictions in mainland China adding a nice tailwind to this year's expansion. Note that this is also the area of the economy now seeing the strongest inflation trend. Prices are rising as consumer-facing firms struggle to meet demand. It's therefore going to be important to watch how long this surge persists for, both from growth and inflation perspectives. The sector PMIs are updated for April on 8th May,

Key diary events

Monday 8 May
UK Market Holiday
Japan BOJ Meeting Minutes
Japan Jibun Bank Services PMI* (Apr)
Australia Building Permits (Mar)
Germany Industrial Production (Mar)
Taiwan Trade (Apr)
United States Wholesale Inventories (Apr)
S&P Global Sector PMI* (Apr)

Tuesday 9 May
Japan Household Spendings (Mar)
Australia Consumer Confidence (May)
Philippines Trade (Mar)
Philippines Industrial Production (Mar)
Australia Retail Sales (Mar, final)
China (Mainland) Trade (Apr)
Malaysia Industrial Production (Mar)
United Kingdom Halifax House Price Index* (Apr)
United Kingdom S&P Global / REC Report on Jobs (Apr)
S&P Global Metal Users PMI* (Apr)
S&P Global Investment Manager Index* (May)

Wednesday 10 May
South Korea Unemployment (Apr)
South Korea Current Account (Mar)
Thailand Consumer Confidence (Apr)
Japan Leading Economic Index (Mar)
Germany Inflation (Apr)
Canada Building Permits (Mar)
United States CPI (Apr)
GEP Global Supply Chain Volatility Index* (Apr)

Thursday 11 May
Japan BOJ Summary of Opinions
Japan Current Account (Mar)
China CPI, PPI (Apr)
Philippines GDP (Q1)
United Kingdom BOE Meeting
United States PPI (Apr)
United States Initial Jobless Claims

Friday 12 May
China (Mainland) M2, New Yuan Loans, Urban FDI (Apr)
China (Mainland) Current Account (Q1)
Hong Kong SAR GDP (Q1)
Malaysia GDP (Q1)
India Industrial Production (Mar)
India Inflation (Apr)
United Kingdom monthly GDP, incl. Manufacturing, Services and Construction Output (Mar)
United Kingdom GDP (Q1)
United States Import, Export Prices (Apr)
United States UoM Sentiment (May, prelim)

* Press releases of indices produced by S&P Global and relevant sponsors can be found here.

What to watch

Americas: US CPI, PPI data, UoM sentiment

Following the FOMC meeting this week, official inflation figures will be updated with US CPI and PPI numbers due Wednesday and Thursday respectively. Consensus expectations are expecting a higher headline monthly US CPI in April, which are in line with indications from the S&P Global Flash US Composite PMI, where higher material costs led to further cost pressures across both the manufacturing and service sectors. Core inflation is expected to have slowed, however, from 0.4% to 0.3%.

Besides inflation data, preliminary University of Michigan consumer sentiment for May will be due. Flash PMI future output readings suggested that confidence improved in April but remained subdued overall amidst concerns over the cost of living and tightening financial conditions.

Europe: UK BOE meeting, Q1 GDP

The Bank of England (BOE) is expected to lift rates by another 25 basis points (bps) in their May, bringing the policy rate to 4.5%. April flash PMI data suggested that business selling price inflation accelerated slightly, thereby keeping the focus on inflation.

Separately, Q1 GDP and March output data will also be released in the United Kingdom. According to Bloomberg consensus, first quarter UK GDP is expected to print 0.4% year-on-year (YoY), down from 0.6% previously.

Asia-Pacific: Mainland China inflation, trade and loans growth data, India CPI, BOJ releases

In APAC, key data releases include mainland China's inflation and trade numbers while India's CPI will also be due. Furthermore, the Bank of Japan updates their summary of opinions from the April meeting that led to yen weakness.

S&P Global Investment Manager Index

Next week also sees the release of the S&P Global Investment Manager Index (IMI) with insights into the latest convictions held by US equity investors.

Risk appetite dipped to a one-year low in April on the back of banking sector concerns. Whether this cautious sentiment lingers will be assessed with the upcoming IMI report, especially as the market's focus shifts back to the fundaments past the peak of the earnings season. Furthermore, the degree to which central bank policies remain a drag will be examined, especially as the Fed is being viewed to be approaching the end of their tightening.

Special reports

Global Factory Output Inches Higher as Supply Improvements Offset Falling Demand - Chris Williamson

India's Economy Continues to Expand as Inflation Moderates - Rajiv Biswas

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Purchasing Managers' Index™ (PMI^®) data are compiled by S&P Global for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies, and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.

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