This Week's Key US Economic Data

The stock market should continue to trend higher this week, as key US economic data are expected to show slower inflation and modest growth.  Although Fed Chair Powell and other Fed officials are slated to speak this week, they are not likely to say anything new.  Most importantly, monetary policy remains on hold.  And, the recent softness in labor market data supports expectations of steady policy for now while leaving open the possibility of rate cuts at some point ahead.

Consensus expects the Total and Core CPI to slow to +0.3% m/m in April from +0.4% in March.  The y/y would slip for both.  However, Total risks printing higher than consensus, boosted by the jump in gasoline prices.  Nevertheless, with gasoline prices stabilizing so far in May, a higher-than-consensus Total will likely be ignored by the markets.  The estimate for Core looks reasonable.  A smaller-than-consensus increase in Core may require a slowdown in Owners' Equivalent Rent to 0.3% from 0.4% and a pause in the sharp upward pace of Motor Vehicle Insurance.  Both would seem to be long shots. 

The other inflation news this week is the April PPI.  Consensus looks for +0.2% m/m for both Total and Core, which would be the same prints as in March.  These would be neutral prints for the markets.

Other key data this week are expected to show a sharp slowdown in Retail Sales in April after they popped in March.  Consensus looks for Total to slow to +0.4% m/m from +0.7% and Ex Auto to slow to +0.2% from +1.1%.  Unless March sales are revised down a lot, consumer spending would still have a solid upward trajectory at the start of Q224.  An issue will be the extent of the consumer's strength.   The Atlanta Fed model's latest estimate of 4.2% Real GDP Growth (q/q, saar) for Q224 has consumer spending up 3.9%.  There is not enough data released so far to attach much reliability to these projections. 

The market may pay attention to the extent to which Housing Starts rebound in April from their March drop.  Consensus sees +6.7% m/m after -14.7% in March.  This would put the level of April Housing Starts at 1.41 Mn units, essentially equal to the Q124 average (1.42 Mn) -- suggesting a flattish underlying trend in residential construction.  The Atlanta Fed model estimates a slight increase in Q224. 

The manufacturing sector was also up modestly in April, according to the consensus estimate of Industrial Production (IP).  Consensus expects +0.2% m/m, after +0.4% in both February and March.   IP (as well as Manufacturing Output) was flat over the 12 months ending in March.