Analysts at Nomura offered their outlook for the week ahead with respect to the data calendar.
"United States | Data preview
Retail sales will likely rebound in March while increased utility output boosts industrial production following a return to colder weather.
Retail sales (Monday): We expect a healthy 0.5% increase in core (“control”) retail sales in March following a weak 0.1% increase in February. Strong consumer confidence and labor market conditions were likely supportive for consumer spending in March. In addition, the delayed arrival of tax refunds relative to historical precedents may have shifted spending in February to March. The BLS’ seasonal adjustment process may not fully filter out this idiosyncratic change in spending pattern. However, recent divergence between elevated optimism and tame growth in personal spending, if continued, may increase the risk that personal spending does not respond to the recent personal tax cuts as strongly as we expected. For non-core components, gasoline prices trended lower in March, pointing to a decline in nominal sales at gasoline stations. A transitory slowdown in construction sector hiring suggests that sales at building material stores, which tend to be volatile, may have declined notably. In addition, considering a sharp increase in auto sale figures reported by WardsAuto in March, sales at auto and auto parts dealerships likely increased solidly. Excluding autos and auto parts, we think retail sales remained flat in March. Put together, we expect a 0.2% increase in total retail sales for March.
Empire State survey (Monday): The Empire State survey headline index jumped to 22.5 in March, from 13.1 February. New orders and shipment indices rose solidly, pointing to continued momentum in demand. Healthy global growth has also been contributing to continued firm growth. However, in the March ISM surveys many industries noted concern over proposed tariffs on steel and aluminum. The prices paid index of the ISM surveys jumped, reflecting these concerns. While the April Empire State survey may reflect some of these concerns, we expect manufacturers’ optimistic outlook to persist. We forecast 18.0 for April following 22.5 in March.
Business inventories (Monday): Real inventory buildup will likely contribute solidly to real GDP growth in Q1. Incoming data indicate a decent 0.3% m-o-m increase in factory inventories in February. Wholesale inventories rose solidly by 1.0% and retail inventories gained a firm 0.4%, although much of the increase in inventories at retail stores was driven by the increase in the stock of autos as sales slowed. Altogether, the final estimate of business inventories will likely come in at a 0.6% increase.
NAHB housing market index (Monday): We expect the April NAHB housing market index to decline 1pp to 69. Demand for housing has been healthy with strong labor market conditions and elevated consumer confidence. However, threats of tariffs between the US and China raised concerns over input costs and the April NAHB survey will likely pick this up. Homebuilders have already highlighted rising costs of building materials. It is possible that they reacted adversely to the recent escalation in trade tensions. In the March ISM non-manufacturing report, respondents from the construction sector noted that “the unbelievable amount of market volatility in construction-related materials that started with lumber continues with the tariffs on steel and aluminum.”
Housing starts (Tuesday): We forecast a 0.7% m-o-m increase in housing starts to an annualized pace of 1245k in March, from 1236k in February. Weather poses a downside risk as cold weather returned in March following a warmer-than-usual February. Reflecting the weather effect, aggregate weekly hours worked by all construction sector employees declined 0.4% m-o-m. Thus, single-family housing starts likely fell in March. However, positive payback to multifamily housing starts could offset much of the decline in the single-family sector as multifamily starts, a typically volatile series, dropped sharply by 26.1% m-o-m in February.
For housing permits, we expect a modest 0.3% m-o-m decline to an annualized pace of 1317k. Colder weather, weaker residential construction employment growth and a slight pullback in home builder expectations for housing market sales likely resulted in fewer permits being issued in March.
Industrial production (Tuesday): We forecast a robust 0.7% m-o-m increase in industrial production in March, partly driven by a strong contribution from utility output. Output from factories excluding autos and auto parts likely rose modestly after a strong gain in February. Various manufacturing surveys point to continued expansion in activity in March, albeit at a slower pace than in February. Aggregate weekly hours worked by all ex-auto manufacturing sector workers declined somewhat but remain at an elevated level. Autos and auto parts production likely remained elevated based on industry production forecasts for March. We expect a steady gain in mining sector production, driven by solid growth in oil and gas extraction and mining support sector output. Firm growth in oil production boosted partly by increases in crude oil prices earlier this year will likely continue in 2018 and poses an upside risk to oil-related sectors. In addition, the weather in March was colder than usual while it was warmer than usual in February. This swing in temperature likely spurred additional heating demand and may have led to a surge in utility output.
Beige Book (Wednesday): The Beige Book prepared for the 1-2 May FOMC meeting will likely provide useful context for the business community’s reaction to the Trump administration’s recent aggressive trade policy announcements. The minutes of the March meeting indicated that some district contacts, particularly those in the agricultural sector, reported angst about the possibility of an escalating trade confrontation. In addition, anecdotal evidence in the Beige Book could shed further light on regional wage pressures as various industries, particularly construction, grapple with ongoing labor shortages. Finally, given the softer-than-expected consumer spending growth thus far in Q1, anecdotal evidence on consumer activities could provide guidance on whether the slowdown is merely transitory.
Initial jobless claims (Thursday): Initial and continuing unemployment claims have remained close to historical lows. Note that the upcoming initial jobless claims release will coincide with the BLS survey week for the April employment report. As the labor market continues to strengthen on the heels of solid Q1 2018 payroll employment growth (despite a weather-induced transitory slowdown), initial and continuing jobless claims should stay low.
Philly Fed survey (Thursday): We expect the Philly Fed survey headline index to fall slightly to 21.5 in April, from 22.3 in March, consistent with our outlook for the Empire State manufacturing survey. Although the Philly Fed survey headline index fell below expectations in March, the details of the survey pointed to continued firm growth. New orders and unfilled orders indices jumped solidly, consistent with elevated demand. We expect the manufacturers to remain optimistic in April, but it is possible that the April Philly Fed survey will reflect concerns over potential disruptions caused by an escalation in US-Sino trade tensions. Concerns over rising input prices and the supply chain impact from trade tensions could affect April business sentiment.
Euro area | Data preview
The week ahead Germany’s ZEW and UK CPI data are in focus next week.
UK Labour market report, Feb/Mar (Tuesday): Last month’s release was upbeat – the unemployment rate fell and employment rose, while at the same time headline wage growth strengthened. However, our favoured measure of wages – private ex-bonus – slowed at various annualised periodicities following a flat reading in January. Wages will likely remain the main focus of this report ahead of the BoE’s May meeting.
Germany ZEW Index, Economic Expectations, Apr (Tuesday): Fears of a possible trade war between the US and China together with tighter financial market conditions have been weighing on economic sentiment in the eurozone in recent weeks. These factors have additionally weighed on the expectations component of the ZEW survey. Despite this, the assessment of the current situation within the survey remains strong. We also note that the ZEW survey has had a poor record of predicting broader macroeconomic developments in Germany. Nevertheless, as financial conditions have remained quite soft and trade tensions are quite high, we expect the ZEW Index expectations component to weaken further, specifically to -2.8 in April after 5.1 in March.
UK Consumer prices, Mar (Wednesday): While we forecast an unchanged CPI inflation reading of 2.7% in March, we think there are, if anything, downside risks to this view. We also expect RPI inflation to remain at 3.6%, implying a constant wedge between RPI and CPI inflation of around 0.9pp. Lower petrol prices are offset elsewhere in our headline CPI forecast, with the result that core CPI inflation could rise modestly in March.
UK Producer prices, Mar (Wednesday): Both the CBI and PMI surveys of output price inflation showed some signs of slowing in March, though the balances remain at high levels. We think this is consistent with a 0.2% m-o-m rise in core prices. We forecast flat headline prices thanks to a decline in petrol prices. Few changes in commodity prices or the currency in March suggest around a flat reading on input prices.
UK Retail sales, Mar (Thursday): There is more than the usual uncertainty associated with the March sales print. On the positive side, the BRC reported a rise in sales growth during the month. However, much of that could be due to the early timing of Easter (which is not adjusted for by the BRC, but is by the ONS). The CBI reported the sales balance was far more downbeat (it turned negative in March) and we expect the dominant factor in the official data will be the negative effect on footfall of the cold weather and snow. As a result, we forecast a decline in official sales in March.
Japan | Data preview
The week ahead All-Japan CPI data for March are released next week and we forecast a slowdown in core inflation.
March trade statistics: nominal exports (Wednesday): We forecast a 5.0% y-o-y increase in nominal exports and a 1.3% rise in nominal imports in March 2018. We estimate a trade surplus (original series) of ¥875.2bn and a seasonally adjusted trade surplus of JPY154.7bn. Nominal exports in the first 20 days of March 2018 increased 5.8% y-o-y (-4.8% in the first 20 days of February) and nominal imports rose 9.9% (25.0%). The first 20 days of March include one more business day than the same period a year earlier and the remainder of March includes two fewer business days. We think growth in nominal exports and imports in March is likely to be lower than for the first 20 days of the month, as the y-o-y differences in the number of business days are likely to boost growth in the first 20 days, and weigh on growth for the remainder of the month. That said, over the past 24 months, the effect on growth in nominal exports and imports from differences in the number of business days in the last 10 days of the month is apparent with respect to imports, but no so apparent with respect to exports. We think growth in nominal exports in March will only be slightly slower than in the first 20 days and growth in nominal imports in March will be slower than in the first 20 days. Adjusting our March nominal import/export estimates for corporate goods price index data for March (-0.5% y-o-y), import prices (1.8%), and seasonal factors, gives us our forecasts for real exports of 0.8% m-o-m and real imports of -2.2%. If our forecasts are accurate, January-March 2018 exports rose 1.2% q-o-q and imports fell 0.9%. We think export growth slowed in January-March 2018 from October-December 2017 (1.7% q-o-q), despite volatile results for January and February stemming from the Chinese New Year.
February all-Japan core CPI (ex-fresh food) (Friday): We expect the March all-Japan core CPI (all items ex fresh food) to rise 0.9% y-o-y, 0.1pp weaker than the February reading of +1.0%. The February reading was 0.1pp stronger than the January reading, and was largely attributable to volatile prices for accommodation and overseas package tours. February’s Tokyo core CPI rose 0.9% y-o-y, 0.2pp stronger than in January, as it was also boosted by these items, but the March Tokyo core CPI rose 0.8%, weaker than in February, as the effects of these items diminish. We think the March all-Japan core CPI will likewise register weaker growth than in February as the boost from accommodation and overseas package tour prices will be moderate.
Asia | Data preview
The week ahead Q1 GDP growth likely edged down in China, though risks are tilted to the upside. We expect Bank Indonesia to leave its policy rate unchanged.
China: Given continued financial deleveraging and the cooling property market, we continue to expect real GDP growth to slow to 6.7% y-o-y in Q1 2018 from 6.8% in Q4 2017. However, we view risks as tilted to the upside due to the strong January-February activity data and People’s Bank of China Governor Yi’s comments that Q1 growth will likely be slightly better than expected. We believe industrial production and fixed asset investment growth likely moderated slightly in March after an unexpected rebound in January-February combined, and we expect retail sales growth to remain stable."
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