| ON DECK FOR FRIDAY, MAY 10 |
KEY POINTS:
- Canadian jobs to start the data march to the June BoC
- Are US consumer expectations still holding at a high level?
- UK GDP beat, but looked less impressive under the hood…
- ...while the way Q1 ended sets up Q2 momentum
It’s jobs Friday in Canada and that’s the main focal point. US consumer sentiment and consumer inflation expectations often offers some degree of market risk. The gilts front-end is outperforming this morning partly on continued spillover effects from yesterday’s BoE decision and perhaps because a GDP beat was of low quality despite the celebratory tone in the press.
Canadian Jobs Start the Data March to the June BoC
Canada could post a rebound in job growth during April (8:30amET) off the prior month's distorted flatness that was dragged down by youths due to March break timing in big parts of the country relative to the LFS reference week (chart 1). Breadth, wages, hours worked, the UR, labour force expansion and population growth are among the other readings that will matter. Please see the global week ahead for further views on the rebalancing of the Canadian labour market and wage pressures.
Is US Consumer Sentiment Still Strong?
US UofM sentiment for May (10amET) will further inform whether the rise in the expectations component to its highest level since 2021 is durable. Also watch the 1- and 5-10 year inflation expectations readings that have both been riding at or above 3%.
UK GDP Looks Less Impressive Under the Hood
The UK economy grew more than expected in Q1 on the surface, but the details were less impressive. GDP was up by 0.6% q/q SA nonannualized (0.4% consensus) which at least temporarily ends the technical recession that occurred with back-to-back declines in 23Q3 and Q4 while posting the strongest growth since 2021Q4 (chart 2). The rub lies in the facts that consumption added only 0.1% to growth in weighted terms, government spending added just under 0.1 ppts, business investment added 0.1 ppts, exports knocked 0.3 ppts off of GDP growth, and lower imports added a weighted ¾% to growth through less of a leakage effect. Inventories fell at a quicker pace which dragged an estimated -½% on growth which is likely the flip side of softer imports.
Q1 ended on a brighter note for the UK economy though and that could carry sounder momentum into Q2 but with an important caveat. GDP was up by 0.4% m/m in March (0.1% consensus) with industrial output up 0.2% m/m (-0.5% consensus), services up 0.5% (0% consensus), manufacturing up 0.3% (consensus -0.5%) and construction down -0.4% m/m (+0.5% consensus). The caveat behind the strong services reading reflects uncertainty toward the role of the earlier than usual Good Friday and Easter holiday effect that started on March 30th this year and its effects on related spending and travel may not have been fully offset by SA factors.
US macro risk will be quiet, other than UofM. Election year politics is behind headlines that Biden is planning tariffs on China perhaps to be announced next week and levied on electric vehicles, batteries, solar equipment etc. Biden isn’t as much of an anti-free trader as Trump’s moronic views, but the rich part of Biden’s action is the finger wagging at China’s subsidies. The US heavily subsidizes EV buyers and producers itself. So does Canada.
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