In the Euro area, the focus will be on the ECB meeting (plus developments in the debt crisis).
Few economic data are due out: the German industry indicators (output and orders) should show……
The coming week is packed with key data in the United States. The manufacturing ISM should correct in April, in line with the indications of several regional surveys, while the nonmanufacturing
ISM should be up after falling in March. The employment report should show a slight slowdown in the employment dynamic, with the unemployment rate stabilising at the 8.8% recorded in March. Construction spending should be up in March after the steep contraction seen in January-February.
Monday 2 May
– The second estimate for the manufacturing PMI might show a small downward revision to 57.5 (steady vs. the previous month) in April. This value would be more consistent with the findings of the national surveys and with some concerns over the resilience of global demand and the appreciation of the euro. The fist estimate for the minor countries should show an index little changed on the previous month.
– Italy. Wages should slow by one-tenth to 2% yoy in March. This would be consistent with month-on-month growth of just one-tenth in the wake of the adjustments envisaged to existing agreements. The year-on-year trend is set to slow further, likely hitting a low around 1.6% yoy this summer. The figure would confirm that the only price pressures are exogenous and there are no inflation risks from pay.
– Construction spending is expected to be up 0.4% mom in March after falling heavily in February (-1.4% mom). New starts bounced in March, after plunging in February; private residential construction spending should be up 2.1% mom, while the non-residential private component should be steady, after rising sharply in February (+0.9% mom); the negative trend in public construction spending should continue, holding back the overall dynamic.
– The manufacturing ISM should fall to 60.2 in April from 61.2 in March. The production component should fall from 69 in March and the employment might correct further from 63 in March; deliveries and inventories too should start to reflect the impact of the Japanese earthquake. The indications from the Philly Fed are negative and would be consistent with a fall in the ISM to close to 54; by contrast, the NY Fed survey was very positive, indicating an improvement in the ISM to 62. The effects of the earthquake in Japan might be reflected negatively in the sector’s performance for several months to come, but some of the fall in the Philadelphia index is in our view a correction following the excessive gain recorded in March.
However, the manufacturing sector indicators probably peaked in the past months and are likely to settle at levels consistent with positive, though slower, expansion.
Euro area
– Producer prices are expected to be up 0.6% mom, largely on the increases in energy prices (and to a lesser degree in intermediate goods prices). The year-on-year trend is expected to be steady at 6.6% (with some upside risks). The input price indices in the PMI still signal upward pressures at the upstream end of the production chain.
– Auto sales should remain virtually steady at 13.1M units ann. in April, vs. 13.06M in March.
According to JD Power estimates based on the survey of dealerships in the first weeks of the month, April recorded further growth in sales to households, vs. a correction in sales to firms.
The sector estimates are for a slowdown in the pace of sales in the second half of the month, as the constraints build on inventories from a shortage of parts due to the earthquake in Japan. Late April and May sales should see a slowdown, the duration of which will depend on the resumption of activity in Japan and the emergence of alternative suppliers.
Euro area
– The second estimate for the service sector PMI might confirm the first reading (56.9, down slightly vs. 57.2 in March). Consequently, given the final reading of the manufacturing indices, the composite PMI might be revised down by two-tenths to 57.6 (steady vs. the previous month). The first estimate for the minor countries will confirm that the divergence between core and peripheral countries is far more marked in services than in industry.
– Retail sales should have fallen by 1,0% m/m in March as data from Germany, Spain, Italy and France hint to a generalised weakness possible the late Easter relative to last year distorted the March reading too. Sales would leave the quarter dynamics at three tenths below the December level, confirming that a meaningful recovery in household demand is not yet imminent.
United States
– The ADP estimate of new non-farm payrolls in the private sector should be steady in April, 200k off the March estimate of 201k.
– The non-manufacturing ISM should rise to 58 in April, after correcting to 57.3 in February (after two months above 59). The Beige Book reports weak retail sales in a couple of districts, and modest rises in the other areas; by contrast, a general improvement is recorded in business related services; services in the real estate sector are weak, and stagnant in financial services. Thus, overall a moderate improvement is anticipated, with activity and employment both up on the March levels of 59.7 and 53.7 respectively.
Euro area
– We expect the ECB will confirm further normalisation of monetary policy. The next hike will come before the summer, most likely in July. The one after that should arrive in the autumn.
– Productivity growth in the first quarter should slow to +0.5% qoq from 2.6% qoq at end-2010.
Euro area
– Germany. Industrial production might fall slightly after two months of strong gains (1.8% mom avg. in January-February). We expect output to fall -0.2% mom, held back by construction after two boom months (+35.2% mom in January and +3.4% mom in February).
The year-on-year movement would remain robust, despite slowing to 9.8% from 14.8%. This would still be only a natural reaction after the boom of the previous months and the trend for German industry will remain very expansionary.
United States
– Non-farm payrolls are expected to be up 200k in April, roughly in line with the average for the last two months (205k). Private non-farm payrolls should be up 220k. Since November 2010, with the end of the census effects, the private sector has created on average 27k more jobs than the change in total payrolls (14k in March): the spread due to the loss of jobs in the state and local public sector should continue for a long while yet. The manufacturing sector should see some moderation in the pace of job creation, while the improvement in services should continue. The unemployment rate should remain unchanged at 8.8%. Hourly wages were unchanged in March: in April the month-on-month movement should be in line with last year’s trend, + 0.2% mom.
Appendix
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