Key Events This Week: Retail Sales And China GDP Amid Fed Speaker Deluge

While the reverberations from this weekend's western strike on Syria will dominate newsflow, if only at the start of the week, while concerns that the US trade war with China may return at any moment remain, there is still some notable data to highlight including China Q1 GDP and US retail sales. The Fedspeak diary is also packed full all week while President Trump is due to meet Japan's Abe, the IMF/World Bank Spring Meetings kick off, and Germany's Merkel and France's Macron meet to discuss EU reform and trade. In addition to all that, US earnings season kicks up a notch with 61 S&P 500 companies due to report.

As Deutsche Bank's Craig Nicol writes, for markets, the most sensitive data print next week will likely come in China when we receive Q1 GDP early on Tuesday morning. As it stands, the market consensus is for a +6.8% yoy print. That follows +6.8% readings in Q4 and Q3 last year.  It's worth noting that we will also get March activity data on Tuesday in China with retail sales, industrial production and fixed asset investment data all due out.

In the US this week there's not a lot of market sensitive data due out. The big release will be this morning at 830am when we get the March retail sales report. The market consensus is for a +0.4% mom headline reading, +0.4% mom ex auto and gas reading and +0.3% mom control group reading. As a reminder the latter is what goes into the national accounts. Other data due next week includes the March housing starts (+2.7% mom expected), building permits (+0.7% mom expected) and industrial production (+0.1% mom expected) data on Tuesday, and initial jobless claims and the March leading index on Thursday.

While it's a fairly light week for data in the US, a busy week for Fedspeak should help to fill the gap somewhat with the next Fed meeting just over 2 weeks away now, particularly given the wide range of views that we should likely hear. The highlights will likely include talks on the economy and outlook from Atlanta Fed President Bostic (neutral/voter) on Monday, San Francisco Fed President Williams (hawk/voter) and Chicago Fed President Evans (dove/non-voter) on Tuesday, NY Fed President and Vice-Chair Dudley (neutral/voter) on Wednesday, Cleveland Fed President Mester (hawk/voter) on Thursday and Evans again on Friday. We also count another 6 scheduled speeches with Quarles (neutral/voter), Harker (dove/non-voter) and Bostic due on Tuesday, Quarles again on Wednesday and Thursday along with Brainard (dove/voter) on Thursday. The Fed will also release its Beige Book on Wednesday.

In Europe next week the most significant data release is Wednesday's final March CPI report where the consensus expects a +1.0% yoy core reading and +1.4% yoy headline print (both unchanged from the flash readings). We'll also get February and March labour market stats in the UK on Tuesday where most of the focus will be on the average weekly earnings data, before we then receive the March CPI/PPI/RPI report on Thursday (core CPI expected to hold steady at +2.4% yoy). The April ZEW survey in Germany will also be out on Tuesday. Over in Asia inflation data should also be a focus with Japan's March CPI report due out on Friday.

Elsewhere, earnings season will ramp up with 61 S&P 500 companies scheduled to release results. The remaining US banks will likely be the highlights including Bank of America (Monday), Goldman Sachs (Tuesday) and Morgan Stanley (Wednesday). Also worth noting are earnings reports from Netflix (Monday), IBM (Tuesday), Johnson & Johnson (Tuesday), Procter & Gamble (Friday) and General Electric (Friday). A reminder that our US equity strategist Binky Chadha expects the bottom-up consensus of just over 18% S&P 500 EPS growth to be beat significantly in Q1 given the typical median beat of around 3%.

Finally, other events worth keeping an eye on next week include an EU foreign ministers meeting Monday regarding the situation in Syria, Japan PM Abe's meeting with President Trump in Florida on Tuesday where they are expected to discuss both North Korea and the latest trade developments, the annual Spring Meetings of the World Bank and IMF commencing on Tuesday and continuing through to April 22nd, and finally Thursday's meeting between Germany's Merkel and France's Macron where EU reforms and trade are expected to be high on the list of agenda items. Given the focus on President Trump's administration, the release of former FBI Director James Comey's book called "A Higher Loyalty: Truth, Lies & Leadership" on Tuesday perhaps shouldn't be underestimated too.

A visual summary of global events:

A breakdown of key events by day, courtesy of Deutsche Bank:

  • Monday: The big release to kick the week off comes in the US with the March retail sales report. Other data due in the US on Monday includes the April empire manufacturing print, February business inventories and April NAHB housing market index reading. There is no data due out in Europe or Asia. Away from the data the BoJ's Amamiya speaks in the morning and the Fed's Bostic is due to speak in the evening. EU foreign ministers are also due to meet to discuss the situation in Syria. Bank of America and Netflix are the earnings highlights.
  • Tuesday: Overnight, all eyes will be on China where we are due to receive the Q1 GDP print as well as April retail sales, industrial production and fixed asset investment data. In Japan we'll also get February industrial production. In Europe the most significant releases are UK employment stats for February and March, and Germany's April ZEW survey. In the afternoon in the US we'll get March housing starts and building permits as well as March industrial and manufacturing production. Tuesday is a busy day for Fedspeak with Williams, Quarles, Harker, Evans and Bostic all slated to speak. Meanwhile, President Trump is due to welcome Japan PM Abe while the IMF and World Bank Annual Spring Meetings will commence, concluding April 22nd. Goldman Sachs in the earnings highlight along with IBM and Johnson & Johnson.
  • Wednesday: Another busy day for data. Overnight we'll get March trade data in Japan and March new home prices data in China. In Europe the main highlights are the March CPI reports for the UK and Euro area. In the US there is no data due out however we will get the Fed's Beige Book, while the Fed's Dudley and Quarles are scheduled to speak. The BoE's Brazier is also due to speak to lawmakers in London. Morgan Stanley will report earnings.
  • Thursday: With nothing of note in Asia, the most notable data due in Europe is the February current account balance reading for the Euro area and March retail sales data for the UK. In the US we'll get the latest weekly initial jobless claims reading, March leading index and April Philly Fed business outlook print. The Fed's Brainard, Quarles and Mester are both due to speak. Worth noting also is talks between Germany's Merkel and France's Macron with EU reforms and trade conflicts with the US expected to be high on the agenda.
  • Friday: A fairly quiet end to the week with March CPI due in Japan, March PPI due in Germany and April consumer confidence for the Euro area. The Fed's Evans is also due to speak again. Procter & Gamble and General Electric are due to report earnings.

* * *

Finally, here is Goldman with a focus on US events, alongside consensus estimates: "The key economic releases this week are retail sales on Monday and industrial production on Tuesday. The Beige Book for the May FOMC meeting will be released on Wednesday. In addition, there are several scheduled speaking engagements by Fed officials this week."

Monday, April 16

  • 08:30 AM Retail sales, March (GS +0.4%, consensus +0.4%, last -0.1%); Retail sales ex-auto, March (GS +0.3%, consensus +0.2%, last +0.2%); Retail sales ex-auto & gas, March (GS +0.5%, consensus +0.4%, last +0.3%); Core retail sales, March (GS +0.6%, consensus +0.3%, last +0.1%): We estimate core retail sales (ex-autos, gasoline, and building materials) rose at a solid 0.6% pace in March, reflecting the arrival of previously delayed tax refunds (and the continued positive impulse from tax reform). Retail spending also appears overdue a pickup following two weak reports. On the negative side, we expect unseasonably high snowfall to weigh on sales in the building materials and food services categories. Based on an increase in auto SAAR but a seasonally adjusted decline in gasoline prices, we estimate 0.4% and 0.3% respective increases in the headline and ex-auto measures.
  • 08:30 AM Empire manufacturing survey, April (consensus +18.2, last +22.5); 10:00 AM NAHB housing market index, April (consensus 70, last 70); Consensus expects the NAHB homebuilders’ index to remain flat at 70 after edging down 1pt in March.
  • 10:00 AM Business inventories (consensus +0.6%, last +0.6%)
  • 01:15 PM Atlanta Fed President Bostic (FOMC voter) speaks: Atlanta Fed President Raphael Bostic will give a speech at the Shoals Chamber of Commerce in Florence, Alabama. Audience Q&A is expected.

Tuesday, April 17

  • 08:30 AM Housing starts, March (GS +1.0%, consensus +2.8%, last -7.0%); Building permits, March (consensus +0.7%, last -5.7%): We estimate housing starts rebounded 1.0% in March following a 7% drop in February that was driven by a sizeable drop in multi-family housing. We expect solid single-family construction fundamentals to be partly offset by wintry weather in March.
  • 09:15 AM Industrial production, March (GS +0.9%, consensus +0.3%, last +1.1%); Manufacturing production, March (GS +0.5%, consensus +0.1%, last +1.2%); Capacity utilization, March (GS +78.2%, consensus +77.9%, last +78.1%): We estimate industrial production rose 0.9% in March, as the utilities category likely rebounded and the mining category rose further. We expect manufacturing production also increased, reflecting strength in both auto- and non-auto manufacturing.
  • 09:15 AM San Francisco Fed President Williams (FOMC voter) speaks: San Francisco Fed President John Williams will give a speech at the NABE-Bank of Spain event in Madrid. Media Q&A is expected.
  • 10:00 AM Vice Chairman for Supervision Quarles (FOMC voter) speaks: Vice Chairman for Supervision Randal Quarles will appear before the House Financial Services Committee to provide his semi-annual testimony on the Fed’s supervision and regulation of the financial system.
  • 11:00 AM Philadelphia Fed President Harker (FOMC non-voter) speaks: Philadelphia Fed President Patrick Harker will give a speech at Saint Joseph’s University. Audience Q&A is expected.
  • 01:40 PM Chicago Fed President Evans (FOMC non-voter speaks): Chicago Fed President Charles Evans will give a speech on current economic conditions and monetary policy at a Chicago Rotary Club luncheon. Audience and media Q&A is expected.

Wednesday, April 18

  • 08:30 AM New York Fed President Dudley (FOMC voter) speaks: New York Fed President William Dudley will give welcome and opening remarks at the Community Bankers Conference in New York.
  • 02:00 PM Beige Book, May FOMC meeting period: The Fed’s Beige Book is a summary of regional economic anecdotes from the 12 Federal Reserve districts. The March Beige Book reported modest-to-moderate growth across all 12 districts. Consumer spending was reportedly mixed, and manufacturing activity was generally firmer. A few contacts noted concerns about pending trade cases and negotiations. In the May Beige Book, we look for additional anecdotes related to the state of consumption, manufacturing activity, price inflation, and wage growth.
  • 03:15 PM New York Fed President Dudley (FOMC voter) speaks: New York Fed President William Dudley will give a speech on the US economic outlook and monetary policy at an event hosted by Lehman College in New York. Audience Q&A is expected.

Thursday, April 19

  • 08:30 AM Philadelphia Fed manufacturing index, April (GS +21.5, consensus +20.8, last +22.3); We expect the Philadelphia Fed manufacturing index to edge down 0.8pt to 21.5 in April. Our forecast reflects uncertainty around trade policy, partially offset by stronger high-frequency business sentiment data. In the March report, the headline index rose by 3.6pt, while the underlying composition looked more favorable. Overall, the index is likely to remain at levels suggestive of moderate expansion in manufacturing activity.
  • 08:30 AM Initial jobless claims, week ended April 14 (GS 225k, consensus 229k, last 233k); Continuing jobless claims, week ended April 7 (consensus 1,842k, last 1,871k): We estimate initial jobless claims declined 8k to 225k in the week ending April 14, following two weeks of elevated readings around the Easter holiday. Seasonal adjustment challenges may have boosted claims in recent weeks, and we note that the level of claims appears unsustainably high in New Jersey. Continuing claims—the number of persons receiving benefits through standard programs—have rebounded in recent weeks, though this too may reflect seasonal adjustment issues as opposed to a change in trend.
  • 09:30 AM Vice Chairman for Supervision Quarles (FOMC voter) speaks: Vice Chairman for Supervision Randal Quarles will appear before the Senate Committee on Banking, Housing, and Urban Affairs to provide his semi-annual testimony on the Fed’s supervision and regulation of the financial system.
  • 06:45 PM Cleveland Fed President Mester (FOMC non-voter) speaks: Cleveland Fed President Loretta Mester will give a speech on the economic outlook and policy at an event jointly sponsored by the University of Pittsburg’s Joseph M. Katz Graduate School of Business and Deloitte LLP. Audience and media Q&A is expected.

Friday, April 20

  • 09:40 AM Chicago Fed President Evans (FOMC non-voter speaks); Chicago Fed President Charles Evans will give a speech on current economic conditions and monetary policy at the Graaskamp Center Spring Board Conference in Chicago. Audience and media Q&A is expected.
  • 11:15 AM San Francisco Fed President Williams (FOMC voter) speaks; San Francisco Fed President John Williams will take part in a fireside chat at the UC Berkeley Fischer Center for Real Estate and Urban Economies in Pebble Beach, California.

Source: Deutsche Bank, Barclays, BofA, Goldman


davatankool Mon, 04/16/2018 - 08:24 Permalink

The retail sales will be flat and yields will drop. yields were collapsing for the past few month as inflation slows down. Remember what incidents have happened to keep it from crash? its almost all geopolitical events. its only tells us a real story, the inflation growth is fake. look at the macro data, pmi, all rolling back quickly, but most people focus on the white house or China.

Salmo trutta Mon, 04/16/2018 - 10:07 Permalink

Monetary policy objectives should be formulated in terms of desired rates-of-change, RoC's, in monetary flows, M*Vt (volume X’s velocity), relative to RoC's in R-gDp. RoC's in N-gDp (though "raw materials, intermediate goods and labor costs, which comprise the bulk of business spending are not treated in N-gDp"), can serve as a proxy figure for RoC's in all transactions, P*T, in American Yale Professor Irving Fisher's truistic: "equation of exchange".

And Alfred Marshall's cash-balances approach (viz., a schedule of the amounts of money that will be offered at given levels of "P"), viz., where at times "K" is the reciprocal of Vt, or “K” has the dimension of a “storage period” and "bridges the gaps of transition periods" in Yale Professor Irving Fisher’s model. RoC's in R-gDp have to be used, of course, as a policy standard.

Neither financial transactions nor “animal spirits” are random:

American, Yale Professor Irving Fisher – 1920 2nd edition: “The Purchasing Power of Money”:
“If the principles here advocated are correct, the purchasing power of money — or its reciprocal, the level of prices — depends exclusively on five definite factors:

(1)the volume of money in circulation;
(2) its velocity of circulation;
(3) the volume of bank deposits subject to check;
(4) its velocity; and
(5) the volume of trade.

“Each of these five magnitudes is extremely definite, and their relation to the purchasing power of money is definitely expressed by an “equation of exchange.”

“In my opinion, the branch of economics which treats of these five regulators of purchasing power ought to be recognized and ultimately will be recognized as an EXACT SCIENCE, capable of precise formulation, demonstration, and statistical verification.”


Salmo trutta Mon, 04/16/2018 - 10:10 Permalink

See my June 2017 forecast:
01/1/2017 ,,,,, 0.13 ,,,,, 0.19
02/1/2017 ,,,,, 0.08 ,,,,, 0.16
03/1/2017 ,,,,, 0.06 ,,,,, 0.13
04/1/2017 ,,,,, 0.08 ,,,,, 0.18
05/1/2017 ,,,,, 0.09 ,,,,, 0.23
06/1/2017 ,,,,, 0.07 ,,,,, 0.19
07/1/2017 ,,,,, 0.07 ,,,,, 0.16 commodities & rates bottom
08/1/2017 ,,,,, 0.06 ,,,,, 0.20
09/1/2017 ,,,,, 0.06 ,,,,, 0.21
10/1/2017 ,,,,, 0.01 ,,,,, 0.21
11/1/2017 ,,,,, 0.03 ,,,,, 0.19
12/1/2017 ,,,,, 0.05 ,,,,, 0.11
01/1/2018 ,,,,, 0.01 ,,,,, 0.17
02/1/2018 ,,,,, 0.00 ,,,,, 0.18 (short commodities/buy bonds)
03/1/2018 ,,,,, 0.00 ,,,,, 0.14
04/1/2018 ,,,,, 0.00 ,,,,, 0.11
05/1/2018 ,,,,, 0.00 ,,,,, 0.12
06/1/2018 ,,,,, 0.00 ,,,,, 0.09
07/1/2018 ,,,,, 0.00 ,,,,, 0.09
08/1/2018 ,,,,, 0.00 ,,,,, 0.07
09/1/2018 ,,,,, 0.00 ,,,,, 0.07
10/1/2018 ,,,,, 0.00 ,,,,, 0.06
11/1/2018 ,,,,, 0.00 ,,,,, 0.06
Jun 25, 2017. 02:54 PMLink
This is the most recent trajectory, and it’s one that’s matching:
Money flows, volume X’s velocity, parse dt; R-gdp, inflation
01/1/2018 ,,,,, 0.09 ,,,,, 0.27 peaks
02/1/2018 ,,,,, 0.07 ,,,,, 0.25
03/1/2018 ,,,,, 0.04 ,,,,, 0.21
04/1/2018 ,,,,, 0.02 ,,,,, 0.17 bottom
05/1/2018 ,,,,, 0.03 ,,,,, 0.18
06/1/2018 ,,,,, 0.02 ,,,,, 0.15
07/1/2018 ,,,,, 0.04 ,,,,, 0.15
08/1/2018 ,,,,, 0.01 ,,,,, 0.13
09/1/2018 ,,,,, 0.00 ,,,,, 0.13
10/1/2018 ,,,,, -0.02 ,,,,, 0.12
11/1/2018 ,,,,, -0.01 ,,,,, 0.11
12/1/2018 ,,,,, 0.00 ,,,,, 0.07
The fact is that everyone is late to the game.

Salmo trutta Mon, 04/16/2018 - 10:17 Permalink

"The Fed is in a tightening mode" – more hubris.


Outside money properties (Central Bank liabilities) aren’t synonymous with inside money properties (DFI, deposit taking, money creating, financial institutions’ liabilities).


IBDDs, interbank demand deposits (a DFI earning asset after Oct. 6, 2018), are not just an asset swap. IBDD’s are assets defined by economists to be outside-of-the properties typically assigned to the money aggregates. IBDD’s are not a medium of exchange. They do not circulate outside of the inter-bank market. They do not require Basel regulatory capital. They are not subject to reserve requirements. In their present state, IOeR’s are a *Romulan cloaking* device, a quasi-tiering of DFI vs. NBFI available credit, a pseudo-credit control device.


Paradoxically, IBDDs are not a member bank’s tax (as the McCarthyites and American Bankers Association speciously hype). They are "Manna from Heaven", digitally manufactured ex-nihilo, cost-less to, and rained on, the payment’s system -- by Simon Potter’s Market Group “trading desk” (money laundered helicopter drops, ergo: sterilized debt monetization).


The FRB-NY trading desk’s open market operations, its “smoke and mirrors” (where the 12 District Reserve Bank “smoothing” procedures were consolidated forming our effective Centralized bank in 1933), has flip-flopped – inverting from a tight money policy to a semi-percolating one (just prior to the 3rd seasonal inflection point).


Digressing note1: Dis-intermediation for the commercial banks ended with the numerous reforms in the Glass–Steagall Act; also ending: "pushing on a string" as only applied prior to the nominal legal adherence to the fallacious "Real Bills Doctrine" when terminated in 1932 - due to a paucity of eligible (hopelessly impaired), commercial and agricultural paper for the 12 District Reserve bank’s discounting purposes.


The prior deceleration in money flows, in its proxy for 1st qr. R-gDp, has abruptly bottomed with the 2nd qtr. R-gDp currently appears to have flat lined (but money growth and velocity have at the same time accelerated), coinciding with the trough in “real-time gross settlements”, oscillating paycheck to paycheck systematic rotation (which reflects the Treasury’s TT&L receipts, prior to its re-depositing payments at one of its master accounts, its General Fund Account, just before making Congressional outlays) as postponed to bank squaring day, April 11th (a surreptitious: on-again, off-again, accounting trick, the injection and draining of IBDDs).


Stephen Goldfeld labeled this type of: “instability in the demand for money function” (Keynes’ liquidity preference curve) as a “case of the missing money”, whereas it was simply related to, e.g., the “monetization” of commercial bank time deposits (ending gate-keeping restrictions), the daily compounding of interest, etc., all of which occurred within the payment’s system. It supposedly “presented a serious challenge to the usefulness of the money demand function as a tool for understanding how monetary policy affects aggregate economic activity.”


This misdirection charged that “advances in computer technology caused the payments mechanism and cash management techniques to undergo rapid changes after 1974. In addition, many new financial instruments (e.g., proliferation in the use of repurchase agreements) emerged and have grown in importance. This has led some researchers to suspect that the rapid pace of financial innovation since 1974 has meant that the conventional definitions of the money supply no longer apply. They searched for a stable money demand function by actually looking directly for the missing money; that is, they looked for financial instruments that have been incorrectly left out of the definition of money used in the money demand function.”


“Conventional” money demand functions over-predicted money demand in the middle and late 1970s; and under-predicted velocity since 1981, and not just (PY/M), or income velocity, Vi, but Irving Fisher’s transactions velocity of circulation, Vt. Thereby M2 was substituted for M1. However, “broad money” substitute measures (vs. “narrow money” or “near money”), or highly liquid assets, “additional variables which do not accurately measure the opportunity cost of holding money”, conflate STOCK with FLOW.


The rapid pace of financial innovation was “validated” by monetary policy, and déjà vu, predictably precipitated the GFC. Economists haven’t found their “missing money”, viz., “the search for a stable money demand function goes on”.


“The recent instability of the money demand function calls into question whether our theories and empirical analyses are adequate. It also has important implications for the way monetary policy should be conducted because it casts doubt on the usefulness of the money demand function as a tool to provide guidance to policymakers. In particular, because the money demand function has become unstable, velocity is now harder to predict, setting rigid money supply targets in order to control aggregate spending in the economy may not be an effective way to conduct monetary policy.”


Note2 aside: The Treasury’s General Fund account has increasingly become a policy lever. Whereas FED-wire transactions were once uncorrelated nettings / settlements prior to the GFC, they have become increasingly an economic modeling variable, a plug in “missing money”.


Note3 aside: It is inaccurate (for the cataloguer of economic statistics) to exclude the Treasury’s General Fund Account from the assets included in M1 (with the exception of WWII). No one has established any unique price effect of federal outlays, as compared to state and local government outlays, or expenditures by the private sector. Of course, the shifting of funds to and out of the Federal Reserve banks has a dollar for dollar effect on member bank reserves, but that is another problem that can be, and is dealt with through open market operations.


-- Michel de Nostredame