Will the Fed be proven right by next weeks' numbers?


Will the Fed be proven right by next weeks' numbers?

From Friday this week until Friday next week, several very important numbers on the US Economy will be printed. Among others, several indicators of inflation will be released. Will the Fed finally see their beloved 2% inflation number appear on their screens?

Below, we give an overview of these indicators, and where possible the expected direction.

Employment Cost and GDP (Friday, April 27th)

US GDP will be the headliner tomorrow, but US Employment Cost, published alongside GDP at 8.30am, could surprise and take the main stage by storm. This quarterly series on labor cost is expected to jump a little, but it if comes in at or above the survey highs of 0.8, it could be a sign of inflation pressure picking up.

GDP in March always drops off, and this time around economists expect no positive surprises either.

Personal Consumption Expenditures (Monday, April 30th)

Core PCE, the Fed’s preferred measure of inflation, will be printed on Monday. The survey median, as depicted below, is 1.972%. If it actually prints that we’ll have wait and to see if it sticks, but the Fed will be relieved to have reached the mandated 2%, and it will be interesting to see what comes out of the next FOMC meeting on March 1-2.

The Treasury’s refunding announcement (Wednesday, May 2nd)

Pretty straightforward; the ever-increasing deficit needs to be funded. From Bloomberg;

Bond dealers predict Treasury will add to last quarter’s acceleration with another across-the-board lift in note and bond auction sizes. Many expect the department will also increase inflation-linked debt sales this time around.

The Jobs Report Lottery (Friday, May the 4th (Star Wars day!))

The headline Non-Farm Payrolls seem to have given their Force to Average Hourly Earnings as of late, as this indicator gives more insight into inflation pressures. There’s no survey number yet, but anything below 2.8% (trendline) will be well received.

From the BLS Employment summary we will also get the Labor Participation Rate. A consolidation of the upward trend would relieve some of the wage pressures.

Earnings and ISM

Finally, there are much more earnings to come, and these will also give more insight into the wellbeing of the economy, and will also give anecdotal evidence of wage pressures. From Bloomberg:

... Starbucks on April 26 and McDonald's on April 30 may give signs as to whether wage pressure is intensifying in a tight labor market and consumer spending is rising. Data from Kraft Heinz (May 2) and Kellogg (May 3), which are struggling with an industry-wide slump that has made it tough to raise prices, may indicate whether inflation will continue to slowly climb.

Published also next week are Manufacturing and Services PMI’s. These will show if President Trump’s tariffs are hurting corporate America. Manufacturing is first on Monday, Services follows on the third of May

Bonus chart: I became curious about the below while writing this. Mind, Employment Cost is reported quarterly, and AHE monthly. This means that we will first get the March Employment cost, and then a week later the April AHE.

Source: Bloomberg


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