MNI US Macro Weekly: Still Bracing For Impact

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Executive Summary

• The week began with US President Trump continuing to attack Fed Chair Powell, calling for interest rates to be cut “now” to prevent the economy from slowing, having said Powell’s “termination cannot come fast enough” the previous week. Further market risk-off seemingly forced Trump to backtrack somewhat.
• Data releases had comparatively limited market impact this week, as the impact of tariffs in the “hard” data remains inconclusive even as the “soft” data flashes warning signals.
• Flash PMIs for April disappointed as business activity growth slowed to a 16-month low whilst expectations about the year ahead dropped to one of the lowest levels since the pandemic. Details were stagflationary, with S&P Global noting that “Prices charged for goods and services meanwhile rose at the sharpest rate for just over a year, with an especially steep increase reported for manufactured goods, linked to tariffs."
• Durable goods orders surged in March on another jump in nondefense aircraft but core orders met expectations for a second tepid month after a previously stronger trend.
• Consumer sentiment wasn’t as weak as first thought in April as a huge climb in inflation expectations was pared back in the final U.Mich survey. U.Mich published an unusual level of granularity around the impact of Apr 2 tariff announcements before the partial pause on Apr 9, implying further increases ahead.
• Jobless claims continue to show no sign of stress ahead of next Friday’s payrolls report.
• Cleveland Fed’s Hammack (’26 voter, dissented against the Dec cut) drew the largest market reaction among FOMC officials this week, suggesting that May is too soon for a cut but the Fed could cut in June “if we have clear and convincing data”.
• The dovish reaction was mostly reversed though, not least because Gov. Waller (permanent voter) followed by saying we won't see the tariff impact in the hard data "until July".
• Next week sees the first estimate of Q1 GDP growth on Wednesday with particularly high uncertainty in part linked to gold arbitrage flows from earlier in the quarter. It’s followed by the March PCE report unusually on the same day, with core PCE expected to be soft but with February revised even higher.
• The April payrolls report will round the week off, with the FOMC in media blackout ahead of the May 6-7 meeting with just 3bp of cuts priced.