Below is our special NewsWire edition to start each week, with a recap of the action from last week and what you should expect in the week ahead.
Democratic President Joe Biden and top congressional Republican Kevin McCarthy reportedly reached a tentative agreement late on Saturday to raise the U.S. government's borrowing limit. This would effectively avert a potential default that could have had severe repercussions on the global economy. However, the deal still faces possible challenges in Congress, with members of both political parties expressing disapproval in certain aspects of the deal. That said, the deal is on course to be voted on this week and is expected to pass.
This week, investors are watching several key updates regarding the U.S. labor market. Many economists expect the cooling effect of the Federal Reserve's interest-rate hikes will start to bleed into key labor market figures. On Wednesday, the U.S. Bureau of Labor Statistics will release the latest Job Openings and Labor Turnover Survey report for April. It will provide insights into the number of job openings, hires, quits, and separations.
Additionally, payroll provider Automatic Data Processing (ADP) will issue its National Employment Report for May, focusing on private sector payrolls. This report will set the stage for the U.S. Department of Labor's May nonfarm payrolls report, which is scheduled for release on Friday. Economists anticipate a gain of only 180,000 jobs in May... fewer than the 253,000 jobs added in April. Unemployment is also predicted to see a slight increase to 3.5%, up from April's 3.4%.
China is scheduled to publish its official Purchasing Managers' Index ("PMI") data on Wednesday, followed by the private sector Caixin Manufacturing PMI the next day. The manufacturing sector's decline is predicted to ease slightly, while the service sector's growth rate is expected to decelerate. Recent economic indicators have already hinted at a loss of momentum in China's second-largest economy, attributed to weakening domestic and international demand.
To promote a sustained economic recovery, the Chinese government has set a modest growth target of approximately 5% for this year. Premier Li Qiang recently pledged to implement targeted measures aimed at boosting domestic demand and stabilizing external demand.
The Eurozone is set to release flash consumer price inflation data for May this week, which is expected to emphasize the significant challenges the European Central Bank ("ECB") faces in its efforts to control price pressures.
Currently, headline inflation in the Eurozone stands at 7% on a year-over-year basis, while underlying annual inflation is at 5.4%. Both are well above the ECB's target of 2%. During its recent meeting earlier this month, the ECB reaffirmed its commitment to raising interest rates, acknowledging that more steps need to be taken to curb inflation.
Furthermore, data released last Thursday revealed that Germany – the largest economy in the Eurozone – entered a recession in the first quarter due to the impact of high inflation on consumer spending.
As always, please submit all thoughts, questions, and commentary to new@stansberryresearch.com.
Until tomorrow,
Kevin Sanford, MBA
May 30, 2023
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