Daily macro update
Tuesday, May 13
US inflation eases more than anticipated
US: NFIB Small Business optimism (Apr): 95.8 vs 95.0 expected (prior: 97.4)
- Sentiment among US small businesses fell for the fourth consecutive month, driven by worries over the economic outlook and sales prospects amid rising tariffs. Businesses reported declining expectations for conditions, job openings, sales, and capital investment plans.
US: CPI (Apr): 0.2% m/m vs 0.3% expected (prior: -0.1%)
- The latest CPI report reveals that goods have yet to show the effects of tariff hikes since February.
- Airfares and hotel prices pulled back, indicating weaker demand for discretionary services. Prices for used cars, trucks, and apparel also declined.
- New car prices remained flat, defying expectations of a tariff-driven increase. However, prices for furniture and appliances, largely imported goods, surged.
- Despite expectations that tariffs would boost inflation, companies may be working through substantial inventory before raising prices.
- Housing costs, which are the largest category within services, picked up to a 0.3% m/m, led by rents.
- Annually, headline inflation slowed from 2.4% to 2.3%, while core inflation held steady at 2.8%.
Germany: Zew (May): 25.2 vs 11.3 expected (prior: -14.0)
- Zew survey highlights increasing optimism for the coming six months, fueled by the establishment of a new federal government, advancements in resolving tariff disputes, and indications of stabilizing inflation.
- Nearly all sectors reported enhanced sentiment. The outlook is especially promising for the banking sector and export-driven industries, including automotive, chemicals, metals, machinery, and steel.
- Despite these positive trends, Germany's current economic assessment remains low, slightly declining by 0.8 points to -82.0.
UK: Unemployment rate (ILO) (Mar): 4.5% as expected (prior: 4.4%)
- The UK unemployment rate increased to 4.5% in the three months to March 2025, reaching its highest level since mid-2021. This rise comes amid a continued slowdown in wage growth and a decline in job vacancies.
- Regular pay, excluding bonuses, grew by 5.6%, falling short of market expectations of 5.7% and down from 5.9% in the previous period. This marks the lowest wage growth since November 2024, affecting both private and public sectors.
Friday, May 09
Italian industrial production only barely up in March
Italy: Industrial production (March): 0.1% m/m vs 0.5% expected (prior: -0.9%)
- IP y/y: -1.8% vs -1.9% expected (prior: -2.6% revised from -2.7%)
- Industrial production only grew by 0.1% in March and is still below the year-ago level.
- Business confidence in the manufacturing sector remains low.
Norway: CPI (April): 0.7% m/m vs 0.6% expected (prior: -0.7%)
- CPI y/y: 2.5% as expected (prior: 2.6%)
- Underlying CPI: 0.5% m/m vs 0.6% expected (prior: 0.2%); 3.0% y/y vs 3.2% expected (prior: 3.4%)
- The headline inflation rate fell for a second month to 2.5%, which is below the central bank's forecast of 2.7% while underlying inflation declined to 3.0%, lowest since January.
- Yesterday, the central bank kept their key rate unchanged at 4.5%, with a pledge to reduce it "in the course of 2025".
- The market currently prices a total of 42 bp of easing by the September meeting.
Switzerland: Seco Consumer confidence (April): -42.4 vs -33 expected (prior: -34.8)
- Swiss consumer confidence fell to the lowest level in more than one year, close to historical lows.
Thursday, May 08
Hawkish cut from BoE
US: Initial jobless claims (May 3): 228k vs 230k expected (prior: 241k)
- Initial jobless claims fell by 13k to 228k, slightly below market expectations of 230k. This marks a significant decline from the two-month high recorded the previous week.
US: Wholesale inventories (Mar F): 0.4% m/m vs 0.5% expected (prior: 0.5%)
- Wholesale inventories were slightly revised downward, falling short of the advance estimate of 0.5% growth after a 0.5% increase in February.
Germany: Industrial production (Mar): 3.0% m/m vs 1.0% expected (prior: -1.3%)
- Germany's industrial production rose 3%, leading to a strong 6% quarterly annualized growth in Q1 2025.
- Manufacturing excelled with a 3.5% monthly increase and 7.4% quarterly growth.
- Pharmaceutical output notably jumped 19.6%, possibly due to tariff front-loading.
UK: BoE lowered its policy rate from 4.5% to 4.25%, as expected
- The BoE's policy committee voted 5-2-2 to cut interest rates, slightly more hawkish than expected. While some members advocated for a more substantial reduction, others preferred maintaining the current rates, reflecting the uncertainty in the global economy.
- The BoE has revised its growth forecast for this year, increasing it to 1% from 0.8%. However, next year's growth projection has been lowered to 1.25% from 1.5%, citing potential risks to both growth and inflation.
- Inflation forecasts have also been adjusted downward: 3.3% for 2025, compared to the previous estimate of 3.5%, and 2.0% for 2026, down from 2.5%.
- The committee emphasized that any easing should proceed gradually and cautiously, particularly considering the uncertainty caused by Trump's sweeping tariffs. Investors have now lowered their expectations for further reductions this year from 94 bp to 60 bp.
Wednesday, May 07
Strong factory orders in Germany
Eurozone: Retail sales (March): -0.1% m/m as expected (prior: 0.2% revised from 0.3%)
- Retail sales y/y 1.5% vs 1.6% expected (prior: 1.9% revised from 2.3%)
- Retail sales in volume terms have been roughly flat since last September and the weakening consumer confidence does not bode well for the coming months.
- Still, positive real wage growth, thanks to lower inflation, could support modest growth in spending.
Germany: Factory orders (March): 3.6% m/m vs 1.3% expected (prior: 0.0%)
- Y/y: 3.8% vs 1.2% expected (prior: -0.2%)
- This solid data could reflect some front-loading ahead of US tariffs, but this should support the economy in the near term.
Tuesday, May 06
Record US trade deficit
US: Trade balance (March): -140.5 bn USD vs -137.2 bn expected (prior: -123.2 bn revised from -122.7 bn)
- The US trade deficit widened to a new record as companies and consumers rushed to import products before tariffs.
- In particular, US imports of pharmaceutical preparations surged 71% in March.
Eurozone: PMI Services (April F.): 50.1 vs 49.7 expected (prior: 51.0)
- The index was revised slightly upwards from the preliminary reading of 49.7, but it remains the lowest level since November 2024.
- Incoming new business edged lower in April to 48.9 from 49.6 in March.
- Disparities between countries remains significant with, for instance, the PMI at 53.4 in Spain, 49.0 in Germany and 47.3 in France.
Eurozone: PPI (March): -1.6% m/m vs -1.4% expected (prior: 0.2%)
- PPI y/y: 1.9% vs 2.5% expected (prior: 3.0%)
- Producer prices fell more than expected in March - another green light for additional ECB easing.
France: Industrial production (March): 0.2% m/m vs 0.3% expected (prior: 1.0% revised from 0.7%)
- IP y/y: 0.2% vs -0.2% expected (prior: -0.3% vs -0.4% expected)
- Industrial production was held back by mining (-4.0% m/m) and electricity & gas (-2.0%), but manufacturing production rose 0.6% (vs +0.5% expected) after a 1.3% jump in February.
Switzerland: Unemployment rate (sa) (April): 2.8% as expected (prior: 2.8%)
- The unadjusted rate unexpectedly fell to 2.8% from 2.9% in March.