US: Key drivers for the week ahead – BBH

Analysts at BBH provide snippets on the key market-moving events that will feature from the United States in the week ahead.

Key quotes

“PCE data Friday will be the highlight.  Headline is expected at 0.1% m/m and 4.1% y/y vs. 0.3% and 5.0% in February, while core PCE is expected at 0.3% m/m and 4.5% y/y vs. 0.3% and 4.6% in February.  Of note, the Cleveland Fed’s inflation Nowcasting model has headline at 0.08% m/m and 4.10% y/y and core PCE at 0.35% m/m and 4.58% y/y, both very close to consensus. There are no estimates for so-called Super Core PCE, which stood at 4.6% y/y in February.  While a headline reading of 4.1% y/y would be the lowest since May 2021, much of that improvement is due to energy as the core measures remain stubbornly high.”

“We get our first look at Q1 GDP Thursday.  Consensus currently is at 2.0% SAAR vs. 2.6% in Q4.  Of note, the Atlanta Fed’s GDPNow model is currently tracking Q1 growth at 2.5% SAAR.  Next and final model update for Q1 will come Wednesday.  After that, the model will start tracking Q2.  The mix of Q1 growth will be important.  In Q4, the bulk of growth came from inventories while personal consumption and net exports slowed.“

“April Chicago PMI Friday will also be closely watched.   Headline is expected at 43.5 vs. 43.8 in March.  However, we see upside risks after S&P Global preliminary PMIs came in stronger than expected last week.  Manufacturing came in 50.4 vs. 49.0 expected and 49.2 in March while services came in at 53.7 vs. 51.5 expected and 52.6 in March.  As a result, the composite rose to 53.5 vs. 51.2 expected and 52.3 in March and was the highest since May 2022.  Of note, April ISM PMIs won't be reported until next week.”

“Q1 Employment Cost Index Thursday will command more attention than usual.  That is because markets are focused on the labor market and the Fed’s desired aim of cooling wage pressures.  Consensus sees 1.1% q/q vs. 1.0% in Q4.  If so, this would be the first pickup after three straight quarters of deceleration from the 1.4% q/q peak in Q1 2022.  Of note, the y/y rate of 5.1% in Q4 was the highest on record dating back to 2001.  Any further acceleration would of course be alarming.”