Given yesterday's upward revision to US Q1 GDP growth from -0.7% q/q (saar) to -0.2%, which largely reflected stronger household consumption, today's personal income and spending figures for May will be scrutinised for further evidence of a solid recovery in Q2 GDP. The strong May payrolls and retail sales prints suggest a strengthening of both income and spending growth which is expected to rise by 0.5% m/m and 0.8% respectively, says Lloyds Bank.
The Fed's preferred inflation measure, the core PCE deflator, is also released for May. This unexpectedly fell to 1.2% y/y in April and this pace is expected to be maintained before picking up over the next few months, adds Lloyds Bank. However, last week's weaker-than-anticipated core-CPI print for May means that there is a downside risk to our call.
The CBI Distributive Trades survey for June will provide some further guidance on UK Q2 activity. Last month's 39 point pickup to a net balance of 51 probably overestimated the underlying rise in retail sales. Although the market is expecting a partial retracement to 35 in June, this would still leave the Q2 average well above its Q1 counterpart and point to a pickup in Q2 activity from the 0.3% q/q reported in Q1, states Lloyds Bank.
