MNI US Macro Weekly: Jury’s Still Out On Q2 Downturn

Download Full Report Here: https://media.marketnews.com/US_macro_weekly_250530_6a23bcc269.pdf EXECUTIVE SUMMARY * While the past week may be remembered for court decisions suspending the majority of the White House's tariffs, it also brought further data evidence that the US economy did not fall off a cliff at the start of Q2. * Consumer surveys (UMichigan, Conference Board) showed a downtick in consumer inflation expectations and improved sentiment, reflecting the US-China trade de-escalation on May 12. * And while updated GDP data showed downwardly revised Q1 domestic demand, April personal consumption slowed but remained positive as underlying income growth remained solid. * Likewise, though core durable goods orders retreated from Q1, a clear dropoff at the start of Q2 was not in full evidence. Regional Fed surveys signaled that activity stabilized in April-May, albeit at relatively weak levels, and labor market data pointed to incremental rather than sharp weakness. * The point was underlined by the Atlanta Fed's nowcast for Q2 GDP growth which jumped to 3.84% on Friday from 2.18% in its May 27 update. Even if dramatic upgrade was due to a lower trade deficit in April as tariff front-running reversed, final domestic demand is still expected to be robust overall. * Of course, things can change quickly: note Friday's apparent re-escalation in US-China trade tensions and the temporary nature of the judicial tariff freeze (which in any case looks to be circumvented by the Trump administration), as well as the July "reciprocal" tariff negotiation deadline continuing to loom large. * For the moment though, while uncertainty looks to be a constant, the data aren't (yet) showing the degree of deterioration that had until recently been feared. * Next week's data highlights include key checkpoints for May, including ISM Manufacturing and Services surveys (which look likely to show some recovery versus April) and the US Employment report. * Nonfarm payrolls growth is expected to moderate in May after a surprisingly robust 177k in April, with consensus currently around the 130k mark. The unemployment rate meanwhile is seen holding at 4.2% for what would be a third consecutive month.

MNI ASIA PAC Weekly Macro Wrap:

A weekly wrap of some of the key macro themes/data outcomes for Asia Pac.

MNI RBNZ Review-May 2025: RBNZ Keeping Options Open

The RBNZ cut rates 25bp to 3.25% following a vote, the first in two years, that included an option to stay on hold.

EUROZONE ISSUANCE: E110bln Investment 2025 Points Towards Ramp-Up In Cash Needs

German finance minister Klingbeil has mentioned he is planning to increase 2025 government investment in the country to E110bln according to Reuters. While current net issuance estimates are a bit unclear against the background of 2025 budget details still to be announced, the comments point towards cash needs in Germany potentially ramping up quicker than anticipated. * German government "investment" was E58.5bln in 2024. The E500mln infrastructure fund passed as part of the debt brake loosening in March is planned to be spent over 12 years - that would equate to E42bln/year on average, or E100bln when adding the two figures up. We hypothesise that at least the remaining E10bln could be classified as military spending from a debt brake / funding standpoint but flow into the government's definition of "investment" considering the figures above. Gov't officials recently commented on increasing German military spending to 5% of GDP by 2032 - 3.5% conventional and an additional 1.5% broader infrastructure which can also be used for military purposes. * The Bundesbank noted in its last monthly report that it expects the "fiscal realignment [as] unlikely to have any impact [in 2025] due to the necessary lead time". Despite "investment" likely lagging behind currently following preliminary budget management, a pickup to E110bln in 2025 should constitute a risk towards a higher deficit / net issuance already in 2025. * Klingbeil has previously mentioned he is looking to gain internal coalition agreement for the 2025 budget by 25 June, and parliamentary passing by mid-July ('Klingbeil Doesn't Oppose Scope For Higher NATO Spending' - May 15). * DFA will publish its Q3 funding outlook in late June. It has flagged considerations to revive the 7y and 50y segments (potentially already in H2) on the back of the increased cash needs. In our view, 7-year Bunds would be well received but it may not be the best time to launch an ultra-long Bund given the steepening of yield curves globally.