Key Events: Is the US Economy Proving Resilient to Tariffs?

Key Events

G10

In the US, there is…

1. Personal income and spending – Friday. Consensus assumes a recovery in spending to 0.6% MoM and implicitly a decline in the savings rate, which would be consistent with my view that the US economy will prove more resilient to the tariffs than market consensus assumes.
2. CB consumer confidence – Wednesday. Consensus assumes a further weakening to 94 from 98.3 in February, which seems inconsistent with the decline in the savings rate assumed in the personal income and spending forecasts. This suggests a risk of positive surprise to consumer confidence.
3. S&P PMIs – Tuesday. PMIs are decoupled from GDP and therefore more a trading than economic event. For market impact please see our event monitor.

In the Eurozone and UK, the main events will be:

1. The UK Chancellor’s Spring Statement – Wednesday. Having announced savings on welfare of £5bn pa, the expectation is for them to announce departmental spending cuts too. Guidance has been for no tax hikes.
2. UK February CPI – Wednesday. The market is looking for 2.9% in the headline, and 3.6% in core and 4.9% in services. This seems reasonable and would be roughly in line with BoE estimates. Given large one-offs, the important part will be the detail.

Elsewhere in G10:

1. Australia budget – Wednesday. Chalmers’ fourth budget likely reveals a smaller underlying budget deficit. We expect cost relief measures, allowances for future increases in defence spending, accounting for recent increases to health spending, and extensions to the Future Made in Australia package to be in focus.
2. Australia February CPI Indicator – Wednesday. The monthly CPI indicator likely remains at +2.5% YoY. February will help gauge quarterly service price updates and the increase to electricity prices.
3. Switzerland UBS Survey KOF Indicator – Wednesday and Friday. Economic indicators from both are beginning to converge on a more bearish path, which could lead to GDP undershoot updated SNB growth expectations.
4. Norway unemployment – Friday. A still strong labour market likely helps confirm relative Norges Bank hawkish was deserved.
5. Sweden retail sales – Friday. After a dramatic recovery in demand, the trend should remain positive, enabling the Riksbank to remain on hold.

EM

1. Singapore CPI – Monday. Base effects will mean YoY inflation drops from last month’s 1.2%. A stronger SGD will also act to dampen price pressures.
2. China Industrial profit – Tuesday. Given slightly improved YTD IP and PPI, industrial profit will depend on the margin development.

Central Banks in Action

1. Fed speaker: Musalem – Wednesday. Musalem is one of the more economically minded FOMC members and is likely to provide a good discussion of the employment-inflation policy trade-off that is now the FOMC focus. Besides Musalem there will be six other speakers, both on the hawkish (Kashkari, Barkin) and dovish (Bostic, Barr, Kugler, Williams) sides.
2. Hungary rate meeting – Tuesday. Inflation at 5.6% in February will mean Varga’s first meeting as governor sees rates firmly left on hold. New forecasts will also see inflation revised higher.
3. Norges Bank – Thursday. We expect the policy rate remains at 4.5% throughout the year, with data on the hawkish side of forecasts.
4. Czechia rate meeting – Thursday. Above-target inflation and a policy rate approaching neutral suggests another rate cut this month is unlikely.
5. PBoC MLF – Tuesday. No change expected; MLF has lost its function as a policy rate. The PBoC will continue replacing the remaining MLF with other liquidity provision like long-term repo and bond purchases.

Markets to Watch

• USD has settled after a period of weakness against EUR. Near-term USD upside is likely as spending data strengthens through February, pricing out US stagflation. We believe this will offer a level to add to our USD short.
• GBP will deal with CPI and GDP data, as well as the Spring Budget, having benefitted from a BoE that was less dovish than expected. We remain long GBP/JPY.
• AUD price action will prove volatile over Tuesday and Wednesday, as Budget and CPI provides volatility. We remain short AUD/NZD.
• NOK is expected to appreciate on the back of a hawkish Norges Bank. However, how hawkish they are will direct the currency. We remain long NOK/SEK.
• UK rates – the UK Spring Statement on Wednesday is likely to add further bearishness to the UK economic outlook. New spending cuts and the prospect of future tax rises could sap some of the recent steepening (if taken as a risk-off) but play into our long SFIZ5.

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