In a holiday-shortened week, traders may be more focused on federal election chatter than a solid lineup of economic releases. They will also get a look at second-quarter bank earnings.

“There are a number of gems that are due out this week,” says RBC Capital Markets. “The shortened week starts off with updates on retail sales and wholesale trade for the month of March. Canada’s international travel account is targeted for a first quarter update on Wednesday. Farm cash receipts for the first quarter of 2004, and the March survey of employment, earnings and hours are both due out on Thursday. Friday brings important updates on the balance of payments plus industrial product and raw materials prices that will be closely watched for evidence of pipeline inflationary pressures. All of this will be minor news in comparison to the May 31 release of first quarter national income accounts that will provide updates on economic growth so far this year.”

CIBC World Markets predicts that the federal election launch will grab the headlines, “but there will also be some positive news on the economic front,” it says. “March retail sales will build on the prior month’s gains, and will join earlier factory shipments data for the same month in pointing to a much needed rebound in GDP growth. While all of that comes too late to rescue the first quarter GDP growth rate, it suggests momentum towards a much better spring trimester.”

“The early read for Tuesday’s retail sales report for March looks strong, following the hefty 1.7% and 2.3% increases in January and February,” agrees BMO Nesbitt Burns. “As well, wholesale trade, due on the same day, is expected to clock in with a sturdy 2% gain. This adds to earlier strong results for housing starts and home sales, exports, and shipments for March, and suggests that overall GDP rebounded with purpose from the shocking flat reading for February.”

Nesbitt also predicts a current account surplus of around $34 billion in the quarter, up from $25.8 billion for all of last year and the highest level in almost three years. And, it calls for a 1% monthly rise in industrial product prices.

South of the border

RBC says the week starts off slow with no U.S. data releases due out on Monday. “Existing home sales on Tuesday and then new home sales on Wednesday will be closely watched. Durable goods orders on Wednesday, plus the weekly mortgage applications and ABC News/Money Magazine consumer comfort index will make for a full day. Thursday will be the biggest day of the week with first quarter growth in real GDP and weekly initial unemployment insurance claims. Friday brings updates on personal income and spending, the University of Michigan consumer sentiment survey, the Chicago purchasing managers’ index, and the NAPM-New York report.”

“A pullback in durable goods orders will only reflect a reversion to a healthy trend after hot figures the prior two months,” says CIBC. It says that high gas prices will keep consumer confidence subdued. “Keep an eye on April personal income and spending,” it counsels. “The March data were surprisingly weak in real terms (up only 0.1%) relative to retail sales, so we could see either an upward revision there or a rebound in April that flies against the drop in retail sales that month. But we don’t expect economic data to have much sway on markets until the next round of payrolls and CPI reports in June.”

Nesbitt notes that the advance estimate for real GDP in Q1 was for a 4.2% annualized gain. “Data that have rolled in since that release suggest that an upward revision to 4.5% is in order. This would push year-over-year GDP growth to almost 5%,”it says. And, it predicts, “U.S. consumer spending is expected to grow by 0.3% in April, the smallest monthly increase in six months. Retail sales fell in April, and will limit any upside spending surprises. Incomes are expected to rise by 0.5%, while the PCE deflator is expected to rise by 0.2%, which would push the year-on-year rate of PCE inflation to 1.6% from 1.4% in March.”

Corporate earnings

The earnings schedule is light except for Canadian banks. Bank of Montreal and CIBC report on Wednesday. TD Bank, Royal Bank and National Bank all go on Thursday, along with Bombardier Inc. and Hudson’s Bay Company. Laurentian Bank reports Friday.

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