The week ahead: 27 - 31 May 2024

US – The primary release next week is the April PCE deflator, the primary inflation indicator used by the FED. Unlike most months, we do not expect PCE to be substantially lower than CPI released earlier this month, due to relatively strong inflationary pressures in the categories PCE overweighs relative to CPI. Correspondingly, we expect headline and core PCE to have grown at 0.3% m/m, with some potential for core to surprise on the downside.

Eurozone – The flash HICP inflation estimate for May is likely to show a rebound, as the base effect from the past year’s decline in energy prices comes out of the y/y comparison. Services inflation could also see a modest uptick, as firm wage growth continues to be passed on to consumers. Big picture, the disinflation trend is on track, and the near-term bounce in annual inflation is likely fully expected also by the ECB, so will not derail rate cuts. We expect the unemployment rate to hold steady at 6.5%, with continued declines in unemployment in the periphery offset by a slight rise in Germany.

The Netherlands – The flash CPI estimate for May is expected to stay roughly equal to the April figure at 2.7%, with the marginal uptick unvisible due to rounding. Compared to previous months where industrial good prices caused a downward effect on inflation, we expect it to be neutral in May. The other components, such as energy, food and services inflation are expected to contribute roughly the same as for the April figure. Generally, inflation is continuing its downward trend. Although the price trend of products with a large wage component – such as labour-intensive services – cause the path downward to take longer.

China – The official PMIs for May published by NBS are due on Friday 31 March. Consensus expectation is for the manufacturing PMI to stay just above the neutral 50 mark separating expansion from contraction. The non-manufacturing PMI (April: 51.2) is expected to pick up somewhat, partly reflecting holiday-related spending.