Analysts at Westpac offered an economic wrap and highlighted the key events for the day ahead.
“US CPI rose 0.2% in April (as expected) while ex-food and energy it rose 0.1% (vs 0.2% expected). The respective annual rates were 2.2% (vs 2.3% expected) and 1.9% (vs 2.0% expected). Notable declines were seen in apparel new vehicles, and medical care was flat. Retail sales in April rose 0.4% (vs 0.6% expected), although the previous month was revised 0.3ppts higher. Breadth was decent, with nine of 13 spending categories recording gains in the month (compared to 7 categories last month). The concern, though, is that even though March was revised higher, we are not really seeing positive momentum in retailing into Q2. Consumer sentiment (Michigan Univ.) improved from 97.0 to 97.7 (vs 97.0 expected), while the 5-10yr inflation expectation component slipped from 2.4% to 2.3%.
FOMC member Evans was “ok” with one more hike this year and would be surprised at more than two, seeing inflation still below 2%. He also expects balance sheet reduction to start before year end, and noted that Trump’s tax plans could either be substantial or not pass. Harker supported two more hikes in 2017, noting the economy is normalising and the labour market is in good health.
NZ: Q1 retail sales volume is expected to rise 0.9%, after a 0.6% rise in Q4. There’s also a speech from Assistant Governor McDermott on forecasting, which will be closely read given the RBNZ’s dovish surprise last Thursday.
Australia: Mar housing finance is expected by Westpac to see a flat result for owner occupier finance approvals from a 0.5% dip in Feb. The value of investor loans fell 5.9% in Feb suggesting that lenders were already ensuring investor credit growth stayed below the existing 10%yr guideline ahead of new macro-prudential measures coming into play in April.
China: Apr retail sales are expected to continue along at 10.9%yr with employment prospects positive over services and industry; while we also get updates on Apr private fixed investment after a welcome acceleration to the start of the year; and Apr industrial production.
US: May NAHB homebuilding survey is out with the index currently trending up though last month’s result did pull back a touch.”