hitchhiker’s guide to upcoming data releases

We've dedicated considerable time as of late to discussing the ongoing trade war and when its effects would start to show up in the data. Tariffs take time to work their way through different layers of the economy, and the data itself is prepared with a lag. For example, the inflation picture for March only came into view at the end of April, when the PCE report was published nearly a month later.

On April 5, a base 10% tariff on all imports to the United States was introduced while tariffs on Chinese goods reached as high as 145% before recently being temporarily reduced to 30%. So while we’re about 50 days into tariff implementation, the first signs of their impacts are only now emerging.

The clearest signal so far has come in the most recent gross domestic product (GDP) release, which showed very noticeable tariff distortions due to a high level of imports, in turn yielding the first negative reading (-0.3%) in three years. GDP, as the name suggests, measures domestic production, and the value of imports are subtracted from the total because they come from abroad. Normally, this is offset as imported goods are used in domestic production or sold, contributing to GDP through other channels. But in Q1, companies rushed to import ahead of the tariffs, which pulled forward a lot of activity and made GDP look weaker than it really was. 

Alongside tariff effects, we’re also watching for other potential signs of strain in the economy and for a change in the ongoing disconnect between weakening sentiment and still-solid economic activity. Surveys have shown that confidence has been low for some time, but consumer spending and business hiring haven't yet perceptibly weakened. A slow-down in consumption or an increase in unemployment will be among the first signs of softening in the economy. With this in mind, we’ve outlined below the key upcoming data releases we're tracking, along with the latest figures and consensus expectations:

Some notes on what to watch for in the data:

1. PCE/CPI: Inflation has been on a downward trend for several months, with March’s PCE release the lowest since February 2021. But per a recent report from Bloomberg, producers have not yet passed the increased costs of tariffs onto consumers, in part due to the stockpiles of product accumulated in anticipation. As this inventory is depleted, more of the cost burden may begin to reach consumers. Major companies like Walmart and Amazon have recently publicly clashed with the federal administration over having to shoulder these costs. Before the recent reduction in China tariffs, UBS had forecasted that inflation would rise to 5% by year-end. The negotiated pause should help limit the impact, but the next few readings will show the full extent.

2. JOLTS: The Job Openings and Labor Turnover Survey tracks the number of open positions employers are actively trying to fill at the end of the month. Openings have tempered from the post-pandemic recovery highs, but still remain above long-term averages. With the NFIP small business survey and University of Michigan sentiment surveys both revealing significant sags in confidence, the upcoming JOLTS data will show whether firms are beginning to pull back on hiring plans (or not).

3. Unemployment Rate: The US headline unemployment rate has remained low, reflecting continued labor market strength. However, recent upticks in initial jobless claims suggest some softening beneath the surface. A meaningful increase in the unemployment rate would be an early sign that labor market resilience may be starting to crack.

4. Retail Sales: Retail sales remain one of the most direct reads of consumer behavior. When households are doing well financially, they tend to spend more on non-essential, discretionary items; likewise, discretionary spending is usually the first area where consumers pull back when confidence weakens. April’s report has already shown a sharp slowdown in retail sales growth, and the consensus forecast for May currently expects no change, highlighting some emerging caution on the consumption front.

5. GDP: As noted above, the Q1 GDP print was the first negative reading in several years, driven in large part by timing distortions from a surge in pre-tariff imports. Q2 should almost certainly show a rebound from a negative Q1, but consensus forecasts still call for only modest growth. If growth remains weak, it could signal that the economy is losing momentum and that recession risks are starting to build.