Week Ahead – US Q1 GDP could get revised down; Japan inflation to dip close to 0%

Raffi Boyadjian, XM Investment Research Desk

The coming week will be relatively quieter following the past week’s data-packed schedule. Monday will be the quietest with very thin trading expected as all major European markets, as well as the US are closed for a bank holiday.

The United States will see the release of durable goods orders on Tuesday, which is expected to fall by 1% in April after a 4% rise in March. Services PMI by Markit out the same day is forecast to show a reading of 57.5 for May, down slightly from April’s 57.8. But the Conference Board Consumer Confidence index is expected to show an improvement to 96.1 in May from 95.2 in April. New home sales numbers will also be eyed after March’s disappointing figures. They are forecast to come in at 515,000 for April.  The US weekly jobless claims are out on Thursday, and Friday will have the second estimates of first quarter GDP. The second estimate is expected to be revised down to -0.9% from 0.2% as data available since then shows a much deeper slowdown than anticipated. Finally, Chicago PMI and the final University of Michigan Confidence index for May should show improving sentiment in May.

On balance, next week’s US data should be broadly positive for second quarter growth but the mixed set of data is likely to continue for a while yet, keeping the pressure on the dollar, until the economy has strengthened significantly enough from the first quarter dip.

More first quarter GDP data is due next week from Spain, Canada and Switzerland and the UK will also release second estimates of its first quarter GDP. Unlike the US, UK GDP is forecast to be revised up to 0.4% from the initial 0.3% estimate.

The Japanese yen could get some attention next week as April industrial production and CPI figures are out on Friday. Industrial production is estimated to rise by 0.8% on the month and the national consumer price index is expected to drop from 2.3% to 0.6% as last year’s sales tax increase is phased out of the index. Also out next week are the minutes from the Bank of Japan’s last policy meeting, as well as retail sales and trade balance data.

The Bank of Canada will hold its May rate setting meeting on Wednesday and is expected to keep its overnight rate unchanged at 0.75%. In its last meeting in April, the Bank of Canada had signalled that further rate cuts are not needed as it raised its inflation outlook. The partial recovery in oil prices since then makes the need for further rate cuts even less likely.