April 27, 2025

QuickTakes

ECONOMIC WEEK AHEAD:

April 28–May 2

The week ahead is jampacked with economic updates. The headliners will be Q1's GDP and March's personal income and expenditures (both Wed) as well as April's payroll employment (Fri). We're expecting relatively strong employment data, which should highlight the US economy's resilience notwithstanding Trump's Tariff Turmoil (TTT). The week's inflation indicators likely remained subdued, although tariff-related inflationary pressures are building. Here's more:

(1) GDP. Wholesalers and retailers rushed to build inventories ahead of tariff implementation, leading to surging imports (chart). Consumer spending growth was subdued because both January and February were unusually cold months. The result will probably be relatively flat real GDP growth in Q1.

(2) Personal income and spending. We're expecting solid increases in personal income and consumer spending for March. Our Earned Income Proxy rose 0.4% m/m last month, which means private wages & salaries likely rose to a new record high (chart). Q2’s real GDP growth rate should rebound back to 2.5%-3.0% as consumers buy big-ticket items ahead of tariff-related price increases.

(3) Employment. Payroll employment rose 228,000 in March to a new record high. April's gain is likely to be lower, perhaps around 150,000. Initial unemployment claims (Thu) has remained historically low throughout this month. Challenger’s announced private-sector layoffs (Thu) also showed little cause for worry thus far.

(4) Inflation. March's PCED headline and core inflation rates (Wed) should be very low on a m/m basis at 0.0% and 0.1% according to the Cleveland Fed's Inflation Nowcasting. That would put these two at 2.2% and 2.5% y/y, down a bit from their February readings (chart).

Q1's Employment Cost Index (Wed) probably remained around 3.5% y/y, while average hourly earnings might have eased closer to 3.5% (chart).

(5) Manufacturing. April's ISM National M-PMI (Thu) likely was back below 50.0 for a second month in a row, as the average of four regional Fed M-PMIs was in contraction. Clarity with respect to trade and tax policy will likely be needed to shore up sentiment in the goods-producing sector.

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