April 13, 2025

QuickTakes

ECONOMIC WEEK AHEAD:

April 14–18

The economic week ahead will provide updates on the goods-producing sector, consumer spending, and inflation. Macroeconomic data may be drowned out by more explosive volatility in the financial markets attributable to Trump's Nitro Tariffs (TNT). In addition, the Q1 earnings season has started, and company managements are likely to provide lots of "we-have-no-idea" guidance as a result of TNT.

In any event, incoming data may signal that the nascent rolling recovery in manufacturing and industrial production could be blown up by TNT unless President Donald Trump continues to pivot toward postponing tariffs while negotiating tariff deals. On the other hand, we are expecting an upside surprise for March retail sales.

Here's what we're focused on this week:

(1) Retail sales. Our Earned Income Proxy increased 0.4% m/m in March. However, retail sales (Wed) probably jumped more than that as consumers rushed to front-run tariffs, especially on durable goods. That explains the surge in March auto sales (chart).

Weekly Redbook retail sales has been growing persistently above 5.0% y/y in recent weeks (chart). So we're expecting solid consumption last month and this month, but a consumer-led slowdown could start around midyear if Trump doesn't continue to pivot fast.

(2) Manufacturing. April's New York (Tue) and Philly (Thu) regional Fed business surveys are likely to be bad news. We're expecting business managers to signal increasing prices and lower production expectations. The average of the two surveys will probably suggest that the national ISM M-PMI will be below 50.0 again this month (chart).

The 0.2% m/m increase in manufacturing hours last month suggests that March's industrial production (Wed) rose to a new record high (chart).

(3) Inflation. Consumer inflation expectations (Mon) as surveyed by the New York Fed likely increased in March, though by much less than in the University of Michigan's survey (chart). We prefer the New York Fed's survey, as does the Federal Reserve Board. Should one-year-ahead inflation expectations reach 3.5%, it will be tough for the Fed to cut interest rates at all this year.

March's import prices (Tue) likely won't increase much given the slowdown in goods CPI and PPI inflation rates during the month (chart). Import prices don't include tariffs. It's possible that higher tariffs will depress import prices if US importers find domestic alternatives and if consumers do the same or retrench.

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