Weekly economic and financial commentary: Hard economic data broadly remain resilient

Summary

United States: Holding the line

• Hard economic data broadly remain resilient and continue to hold the line, even as sentiment and survey data show trade-policy-induced uncertainty is a foremost concern. Regional purchasing manager indexes and the Beige Book were weighed down by the uncertain outlook, while durable goods orders came in stronger than expected.
• Next week: Q1 GDP (Wed.), ISM Manufacturing Index (Thu.), Employment (Fri.)

International: European sentiment underwhelms amid heightened uncertainty

• Compared to recent weeks' headlines and market turbulence, this was somewhat of a lighter week in terms of international economic data. To start, we got the April Eurozone PMIs this week, and the results were generally underwhelming, contributing at the margin to our view that the risks are tilted toward more European Central Bank easing than we currently forecast. The United Kingdom PMIs were notably soft, possibly signaling lackluster growth prospects for the economy.
• Next week: China PMIs (Wed.), Eurozone PMIs (Wed.), Bank of Japan Policy Rate (Thu.)

Interest rate watch: Fed remains in a holding pattern

• The tone from this week's Fedspeak maintained the majority opinion the FOMC held at its March meeting-a desire to hold rates steady on account of above-target inflation and elevated uncertainty. It appears most officials are comfortable waiting to assess the comprehensive impact of pending policy shifts before making further adjustments to the federal funds rate.

Topic of the week: Déjà vu

• President Trump suggested that tariffs on China may be reduced if the two nations reach a fair deal. Although it’s hard to know exactly what such a deal might look like, U.S.-China Phase One and Phase Two trade agreement negotiations during the president’s first term offer some insight. Our expectation is that U.S. tariffs on China will be brought down from their current extraordinary levels but will remain elevated above historical norms.

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