Last week was the U.S. CPI data for April, which was 8.3% YoY versus 8.1% expected and 8.5% YoY in March. As the print run was stronger than expected, it fueled inflationary fears in the U.S. and led to extreme volatility across many asset classes, particularly stock indices and the U.S. dollar. This week, the focus is on the consumer, as some consumer-related data will be released, including Retail Sales from China, the United States and the United Kingdom. Also, this seems to be a retail week for revenue, as companies like HD, WMT, TGT and CSCO are all looking to report. Have consumers continued to spend despite rising inflation? That will be the key question this week!
CPI, inflation and the Fed
As mentioned, the U.S. CPI print for April was 8.3% YoY versus 8.1% YoY expected. In addition, the U.S. PPI print was 11% YoY versus the expected 10.7% YoY. Although slightly lower than March levels, inflation data in the United States is still high. Remember that the Fed is targeting 2% inflation! This has led Fed members to try to talk down inflationary fears. The consensus seemed to be that a 50bps increase is on the table for June and July. Cleveland Fed Chair Loretta Mester summed up recent weeks Fed spokesmen saying the September Fed meeting is the time to take stock of whether prices are rising or falling, and how policy should respond. Did she set the table for two 50bps uploads, and then a review? Markets are expected to find out more this week as Fed Chairman Powell talks about inflation on Tuesday.
Can the consumer save the economy?
On Friday, the markets received their first look at the Michigan Consumer Sentiment report for May. The headline reading was 59.1 against 64 expected and 65.2 in April. This was the lowest reading since August 2011! The major contributor to low reading was inflation concerns. This week, the United States will release Retail Sales. Expectations for the title for April are + 0.9% after + 0.5% reading in March. Ex-cars, the reading is only + 0.4% against + 1.1% in March. Has the U.S. consumer continued to spend despite rising inflation?
UK hoping to avoid recession
The U.S. is not the only country to release retail sales data this week. On Friday, the UK will release its own numbers on Retail Sales for April. The headline print is expected to rise to -0.2% from -1.1% in March. The expectation is similar for the ex-fuel, -0.2% against -1.1% in March. May 5thth, BOE Governor Bailey said the central bank had concerns about raising rates in a possible recession. Indeed, the GDP reading for March was -0.1%. Further data this week could put the UK on a slippery slope as it will also release the data on the Demand Change, Industrial Production and CPI.
In addition to the United States and the United Kingdom, China will also release Retail Sales for April this week. How much did the confinement in Shanghai and general Covid restrictions across the country affect spending during April? Expectations are for a headline print of -6.1% versus -3.5% in March. In addition, China will release Industrial Production and Unemployment for April. Industrial Production is expected to have declined to 0.4% YoY from 5% YoY in March! The Unemployment Rate is expected to rise to 6% in April from 5.8% in March. Traders should look at the data, which will be released on Monday, as a slowdown in China could lead to continued supply chain problems and possible slowdowns around the rest of the world.
As mentioned, this is consumer week. And many consumer retailers will release revenue this week. Among the most popular are M, HD, WMT, TGT, CSCO and LOW. Some of the other major releases this week are as follows:
RYAAY, TME, BIDU, M, HD, JD, VOD, WMT, BBWI, TGT, CSCO, LOW, AMAT, BJ, KSS, DE, FL, DKNG
Although we have already listed many of the economic data events on the calendar already in this article, there are a few that have not been affected. These include the latest RBA Protocol, Japan’s first look at Q1 GDP, and CPI data from Canada and Japan. Other important economic data for this week are:
- New Zealand: NZ PSI Services (APR)
- Japan: PPI (APR)
- China: Industrial Production (APR)
- China: Retail (APR)
- China: Unemployment Rate (APR)
- EU: Trade Balance Sheet (MAR)
- Canada: Housing Beginnings (APR)
- United States: NY Empire State Manufacturing Index (MAY)
- Australia: RBA Meeting Minutes
- UK: Change in Demand Calculation (APR)
- EU: Employment Change Prel (Q1)
- EU: GDP Growth Index 2nd East (Q1)
- United States: Retail Sales (APR)
- United States: Industrial Production (APR)
- United States: Production Production (APR)
- United States: NAHB Housing Market Index (MAY)
- EU: ECB President Lagarde Speech
- United States: Powell’s speech by the Fed Chairman
- Japan: Reuters Tankan Index (MAY)
- Japan: GDP Growth Rate Prel (Q1)
- Australia: Wage Price Index (Q1)
- China House Price Index (APR)
- Japan: Industrial Production Final (MAR)
- UK: Inflation data (APR)
- EU: CPI Final (APR)
- Canada: CPI (APR)
- United States: Housing Beginnings (APR)
- United States: Building Licenses (APR)
- Raw Stocks
- New Zealand: PPI (Q1)
- Japan: Machinery Orders (MAR)
- Australia: Employment Change (APR)
- Canada: PPI (APR)
- United States: Philadelphia Fed Manufacturing Index (APR)
- United States: Existing Home Sales (APR)
- New Zealand: Trade Balance Sheet (APR)
- Japan: CPI (APR)
- China: 1 Year Main Rate Loan (MAY)
- Australia: Consumer Inflation Expectations (MAY)
- Germany: PPI (APR)
- UK: Retail Sales (APR)
- EU: Consumer Confidence Lightning (MAY)
Diagram of the Week: Weekly USD / CHF
Source: Tradingview, Stone X
USD / CHF soared through a tie to end the week above 1.0000. This was the sixth consecutive positive week for the pair and its highest level since the week of May 27.th, 2019. USD / CHF has moved lower since the spring of 2019, when it reached 1.0226. It touched 0.8768 during the first week of 2021 and began to move higher in a growing triangle. During the week of April 18thth, USD / CHF broke higher from the triangle, near 0.9460, and the pair did not look back. Over the past 6 weeks, the pair has moved from a low of 0.9237 to this week’s high of 1.0049, a gain of almost 8.8%! The target for the breaking of a rising triangle is the height of the triangle added to the breaking point, which is close to 1.0160. There is no major resistance until the May 6 highsth, 2019 at 1.0226. However, note that the RSI is in overbought territory, an indication that many USD / CHF are ready for withdrawal. First support in the weekly time frame is the double top of March 2020 at 0.9900, just ahead of last week’s low at 0.9871. Down there, price may fall to the low of 2 weeks ago at 0.9709.
Consumer economic data and retailer gains will be up front and central this week. Can the consumer keep up with the economy despite rising inflation? Pay attention to more volatility if the data doesn’t come out in line with expectations.
Have a great weekend!