The week will start out strong with the flash manufacturing and services PMIs being released for the eurozone, the U.K. and the U.S. on Monday.
On Tuesday, Japan will publish the BoJ core CPI y/y, and Canada will release its inflation data. In the U.S., we’ll get the CB consumer confidence report and the Richmond manufacturing index.
Fed Chair Powell and Fed representatives are scheduled to testify on the Semiannual Monetary Policy Report before the House Financial Services Committee, with appearances both Tuesday and Wednesday. Also on Wednesday Australia will publish its inflation data.
On Thursday, the U.S. will release the final GDP q/q, weekly unemployment claims, and durable goods orders m/m.
On Friday, Japan will publish the Tokyo core CPI y/y; Canada will report GDP m/m; and the U.S. will release the core monthly PCE price index, personal income, and personal spending data.
Throughout the week, several FOMC members are expected to deliver remarks.
In Canada, the consensus for the CPI m/m is 0.5% versus the prior -0.1%. This week’s inflation data is expected to provide clearer direction on the inflation trend and will be a key factor influencing the Bank of Canada’s decision at the July meeting. Before then, another round of labor market data and the Q2 Business Outlook Survey will also be released.
May’s CPI report could start shaping market expectations ahead of the BoC’s July decision. Headline inflation is projected to remain subdued, with consensus estimating a 1.7% y/y increase, reflecting the earlier removal of the federal carbon tax and weaker energy prices.
Focus will likely be on core inflation, which rose to 3.2% y/y in April. A significant slowdown in May, especially to 2.9% or below, would strengthen the case for a rate cut. On the other hand, if core inflation remains sticky, the BoC may opt to keep policy unchanged, Wells Fargo analysts said.
Fed Chair Powell’s testimony in Congress will be important to watch on Tuesday as he will face tough questioning from Republican Party members on the decision to not cut interest rates.
In Australia, the consensus for CPI y/y is 2.4%, unchanged from the prior reading. However, some analysts expect it to drop to 2.3% as base effects and seasonal patterns weigh on the headline. Westpac forecasts a monthly decline of 0.2%, though seasonally adjusted figures point to a modest 0.2% rise. April’s inflation was lifted by healthcare and housing, while the trimmed mean edged up to 2.8% y/y.
May’s CPI release will provide insight into price developments across several service sectors typically updated mid-quarter, including restaurants, personal care, household repairs, and tech-related services.
In terms of monetary policy, even though inflation is showing signs of moderation, the RBA is likely to keep a close eye on underlying inflation pressures as it assesses the future path of rates.
In the U.S. the consensus for the core durable goods orders m/m is 0.1% vs prior 0.2% and for the durable goods orders m/m is 6.8% vs prior -6.3%.
Durable goods orders likely rebounded in May, primarily due to a surge in aircraft demand, with Boeing receiving over 300 new orders. This is expected to drive an almost 9% increase in total orders, reversing April’s 6.3% decline.
Excluding transportation, however, the gain was likely modest at around 0.2%, signaling continued softness in broader demand according to analysts from Wells Fargo.
Core capital goods orders, which filter out defense and aircraft, suggest a slowdown in business investment. Earlier strength was likely tied to pre-tariff buying, especially in tech-related equipment.
Wells Fargo notes that with businesses facing persistent trade uncertainty, tight financial conditions, and a cautious economic outlook, capital expenditure is set to lose momentum in the second quarter. Markets will be watching nondefense capital goods shipments closely in the upcoming release for confirmation.
In Japan, the consensus for the Tokyo core CPI y/y is expected to decline from 3.6% to 3.4%, which is a positive sign. Government measures such as the release of rice reserves may help contain food prices, though broader service costs, particularly rents, are expected to continue rising steadily, according to analysts at ING.
Japan’s labor market remains tight, with the unemployment rate projected to hold at 2.5%. Retail sales are likely to show solid gains, supported by government subsidies and direct cash transfers.
Flash PMI readings should indicate a modest rebound in services activity, driven by wage growth and fiscal support, but the manufacturing sector likely continues to face pressure amid rising uncertainty related to U.S. trade policy. Overall, second-quarter data will point to a mild recovery in economic activity.
In the U.S., the consensus for the core PCE price index m/m is 0.1%, unchanged from the prior reading. Personal income m/m is expected at 0.2% vs prior 0.8%, and personal spending m/m is seen at 0.2%, also matching the previous figure.
Recent data indicate some softening in U.S. consumer activity, though the overall picture remains mixed. May retail sales pulled back following strong demand earlier in the spring, particularly in autos and building materials. Weakness also appeared in discretionary categories such as restaurants. However, the control group which excludes more volatile components remained steady, suggesting that core goods consumption held up, according to Wells Fargo.
For the upcoming May personal income and spending report, nominal spending is expected to rise a modest 0.1%, while real spending is forecasted to decline slightly by 0.1%, weighed down by higher prices and weaker auto sales. Broader services spending may also slow. Still, overall consumption remains above its pre-pandemic average.
Income growth continues to be supportive, with April’s 0.8% gain in personal income driven in part by social security adjustments and upward revisions to previous data. So far, tariffs have not had a significant impact on consumer prices. Going forward, markets will be watching to see whether growing consumer caution translates into a meaningful decline in discretionary spending.
