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Look forward at May 11, 2020 week: Retail to fall in April, inflation held back by energy prices

A look forward to the May 11 week has a series of data reports that will focus on inflation and consumer confidence. However, the standout is going to be the April data on retail and food sales at 8:30 ET on Friday.

Retail and food sales plunged 8.4% in March, brought lower by a sharp decline in motor vehicles and falling prices for gasoline. In April, the total will reflect another deceleration in motor vehicle sales. Declines in gasoline prices were less steep, but the trend will be working against the seasonal adjustment factors that expect prices to increase during the period in which motor fuel formulations switch for the summer months. Also, now that initial panic-buying of paper goods and nonperishable food items has wound down, sales at some retail outlets that offer these items will decline. Restaurants may be doing less badly after the 26.5% plunge in sales in March as they geared up to serve take-out meals, but this is a fraction past sales.

The NFIB Small Business Optimism Index for April at 6:00 ET on Tuesday should decline from the 96.4 in March as the full weight of the measures to combat the spread of COVID-19 are felt. Efforts to provide relief such as the CARES act and Federal Reserve lending facilities will help, but the reading for the index is likely to fall into recessionary territory. Small businesses are going to have to deal with sudden and sharp contraction in present conditions as well as greater uncertainty about the future.

The preliminary University of Michigan Consumer Sentiment Index for May at 10:00 ET on Friday is expected to see confidence decline further after 17.3 point drop to 71.8 in April. A lot of the damage to confidence was already done in the past two months, so it the worsening should not be quite as dramatic. But as business closures remain widespread and lifting them only tentative and uneven, consumers will remain worried about the labor market.

Initial jobless claims for the week ended May 9 at 8:30 ET on Thursday should continue to ebb even while remaining elevated at unprecedented levels. The level of insured unemployment for the week ended May 2 will reflect the cumulative 30.7 million claims (unadjusted) that have been filed since the March 21 week. Not all claims applied for will be granted, but state authorities are being generous in approving applications. There are also programs under the CARES act to provide benefits to those not eligible for benefits and the Labor Department has begun to report these with a two week lag.

The data on Job Openings and Labor Turnover (JOLTS) for March at 10:0 ET on Friday will not feel particularly relevant since the collapse in hiring and sharp rise in layoffs is already well known. Nonetheless, it will help quantify what went on in a tumultuous month for the labor market.

The April Consumer Price Index at 8:30 ET on Tuesday, the Final Demand Producer Price Index at 8:30 ET on Wednesday, and the Import Price Index at 8:30 ET on Thursday will all speak to the ongoing downward movement for energy prices. While Fed policymakers are not going to ignore the weakening in inflation measures, that is not their priority while the labor market is in such bad shape. Moreover, the tool for getting employment back up is the same as that for inflation. So stimulus will be the order of the day once the acute response to disruptions in the economy and financial markets is accomplished.

Inflation expectations are likely to remain low for both consumers and businesses. The May University of Michigan Survey of Consumers at 10:00 ET on Friday should see the 1-year inflation expectations at or around the 2.1% of March while the 5-year inflation expectations could soften again after rising to 2.5% in March. The Atlanta Fed’s Business Inflation Expectation survey for May at 10:00 ET on Wednesday should be around the 1.4% survey mean reported for April which was a series low.

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