In the wake of the softer-than-expected payroll gains for April in the monthly employment report, the inflation data for April in the May 13 week become the next signpost for the outlook for Fed monetary policy. Markets reacted to the hint of softening in the labor market by anticipating easier financial conditions. However, it is only one month’s data and only half of the Fed’s dual mandate for maximum employment and price stability. The FOMC’s vigilance on the inflation front means that its attention may shift back more to the latter even if the FOMC statement from May 1 said that risks at that time were more balanced.

The CPI report is scheduled for 8:30 ET on Wednesday. It is preceded by the PPI report at 8:30 ET on Tuesday and followed by the import and export price indexes at 8:30 ET on Thursday. The April readings for all-items and the core measures will get the first consideration as to whether the disinflation begun in 2022 is running out of steam. The second is services inflation and how slow it has been easing off. As for goods, now that supply-chain issues have stabilized, further improvements are likely to be more limited.

Economic growth should still look supported by consumer spending in the first month of the second quarter 2024. The April numbers on retail and food services sales at 8:30 ET on Wednesday should reflect the uptick in the pace of sales of motor vehicles. Gasoline prices were on the rise in April, but that is a normal pattern as refineries change over to summer fuel formulations and should be accounted for in seasonal adjustment factors. However, travel around the holidays and spring break may have increased the volume of sales, so it could be a positive for retail as well. Spending in April may get a boost from tax refunds in 2024 which are larger than those sent out in 2023. Tax refunds go to buying big ticket items such as cars and appliances, but could also be directed to savings or paying down debt.

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