The Covid-19 situation has continued to improve in the EU and the United States as weather is warming and most risk groups have now received the first vaccine dose. The situation in India remains difficult, as the number of new infections remain high. Vaccinations generally appear to be effective against the current mutations, including the Indian variant B.1.617. Read more in our COVID-19 Update: More progress in Europe, vaccination pace slows in the US but new infections decline further, 6 May.
The US ISM PMIs released this week declined modestly against expectations despite US economic activity being generally supported by easing of restrictions. Both manufacturing and services continued to signal higher price pressures as well as longer supplier’s delivery times.
Norges Bank’s interim meeting was uneventful as expected. The central bank considered that the Norwegian economy has recovered in line with expectations, and maintained the verbal guidance for a rate hike in the latter half of 2021. Read more in our Norges Bank Review – No change; next big event is Monday’s vaccine decision, 6 May.
Next week German ZEW expectations released on Tuesday for May should still paint a constructive picture of the recovery. ECB minutes on Friday are not expected to bring much new information as the April meeting was relatively uneventful. Markets will keep an eye on the PEPP discussions in the GC and how confident ECB is on the economic recovery. For a broader picture of economic developments in the Euro Area, see our latest Euro Area Macro Monitor: Double-dip recession, but spring is in the air, 5 May.
Base effects will continue to distort the US April CPI figures, and while markets are most likely prepared for a higher figure once again, focus will be on any signs of accelerating underlying inflation pressure. Markets will also follow the US Retail Sales on Friday to see if the boost from the March stimulus checks carried over to April.
China releases data on credit growth and inflation. Credit growth may rebound a bit after hitting quite low levels early in 2021. On inflation, PPI should attract most attention as it is moving higher on the back of the rise in commodity prices and base effects. It is set to rise to 6½-7% y/y from 4.4% in March which would be the highest in four years, and could add to the global inflation scare.
In week 20, China will also release industrial production and retail sales data for April. In Japan, Q1 GDP figures tick in on 18 May. Following a good comeback in H2 last year, we expect another setback, with an estimated -1% growth, as the state of emergency put in place in early January has caused another plunge in consumption.
Markets will also look for any signals of the future path of Fed’s monetary policy from the FOMC minutes of the April meeting, released on 19 May. Finally, Markit Flash PMIs for Euro Area and the United States are due for release on Friday 21 May, and we expect another set of strong readings as further restrictions have been lifted over the past weeks.
