US DATA: NY Fed Consumer Inflation Concerns Ease In May (1/2)
The New York Fed's Survey of Consumer Expectations (SCE) showed an improvement across the board in May, with respondents both less pessimistic on economic prospects and less concerned about future inflation compared with April. The prior months will of course have been impacted by the anticipation and announcement of April's "Liberation Day" tariffs, while May's respondents will have taken into account the US-China trade conflict climbdown on May 12 (NY Fed: "The survey is structured so that a roughly equal amount of data are collected every week of the month.")
- 1-Year median inflation expectations fell to 3.2% from 3.6% prior, the biggest drop since February 2023 to the lowest level since February of this year. 3Y median ticked 0.2pp lower to 3.00% (fully reversing what now appears to be a temporary tariff-led increase in April).
- The 5Y median fell to the lowest unrounded (2.61% from 2.74%) since January 2024, and is now nearly 0.4pp below the early-2024 peak.
- These levels are much closer to the longer-term averages, having not come close to pandemic reopening highs (at least in the cases of the 1Y and 3Y figures, the 5Y started in 2022).
- The NY Fed survey is seen as having a more robust methodology than other consumer surveys, and has certainly been less volatile during the current tariff episode. The UMichigan survey actually saw an uptick in the May 1Y reading in May (6.6% vs 6.5% April) albeit a slight decline in the 5-10Y (4.2% vs 4.4%); the Conference Board survey saw a 0.6pp pullback to 5.3% median 1Y expectations.
- The survey notes the declines "were broad-based across age, education, and income groups" and that "median inflation uncertainty—or the uncertainty expressed regarding future inflation outcomes—declined at the one-year horizon and was unchanged at the three- and five-year horizons."
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
MACRO OUTLOOK: US PPI/Retail Sales And Powell Follow On Thursday [2/2]
- Core PCE implications will then be watched closely in Thursday’s PPI report, and we expect with additional focus on portfolio management after last month’s huge upward revision to February.
- Retail sales, whilst only reported in nominal terms, will offer a keenly awaited look at consumer behavior.
- Real spending moderated to 1.8% annualized in Q1 after 4.0% in Q4 despite likely tariff front-running, with April a good test of how much discretionary spending was pulled forward.
- Finally, Powell provides “Opening Remarks” at the Second Thomas Laubach Research Conference, although he’s allotted twenty minutes so there is scope for more substantive remarks than you’d usually expect. His message at Wednesday’s FOMC press conference was one firmly of being in no hurry to cut rates amidst huge uncertainty. He also appeared to put more weight on hard data over soft indicators that appear more stagflationary in nature.
MACRO OUTLOOK: US CPI Offers Look At April Tariff Distortions on Tuesday [1/2]
- The week’s US data calendar is highlighted by CPI inflation on Tuesday although PPI inflation and retail sales reports on Thursday are in close second. All three releases are going to be important, offering further hard data for April in the first month under reciprocal tariffs. What’s more, PPI and retail sales are followed by Fed Chair Powell just ten minutes after their release (more on that below).
- Core CPI inflation is seen accelerating to 0.3% M/M in April, with six unrounded estimates we’ve seen to date averaging 0.27% M/M.
- A potential for a ‘low’ 0.3% aside, it’s still likely a swift acceleration from a particularly soft 0.06% M/M in March which was in large part down to surprisingly abrupt declines in lodging away from home (-3.5%) and airfare (-5.3%) prices.
- This lodging weakness carried over to core PCE inflation back in March, at just 0.03% M/M after a particularly strong 0.50% M/M in February in a large wedge with core CPI at 0.23% M/M.
- Markets currently price a next Fed cut with the September FOMC meeting.
USDCAD TECHS: Pressuring Resistance
- RES 4: 1.4296 High Apr 7
- RES 3: 1.4111 High Apr 4
- RES 2: 1.4041 50-day EMA
- RES 1: 1.3943 High May 9
- PRICE: 1.3930 @ 16:06 BST May 9
- SUP 1: 1.3751 Low May 6
- SUP 2: 1.3744 76.4% retracement of Sep 25 ‘24 - Feb 3 bull run
- SUP 3: 1.3696 Low Oct 10 2024
- SUP 4: 1.3643 Low Oct 9 ‘24
USDCAD has recovered from its recent lows. Despite the recovery, the trend condition remains bearish and short-term gains are considered corrective. A fresh cycle low on Tuesday reinforces the bearish theme. Potential is seen for a move towards 1.3744, a Fibonacci retracement. Note that moving average studies are in a bear mode position, highlighting a dominant downtrend. Key resistance is seen at 1.4041, the 50-day EMA.
