Traders will likely focus on U.S. inflation reports this week, as they try to price in the size and timing of interest rate hikes. Meanwhile, there is plenty of economic data from Canada in the pipeline.

“On Monday, April housing starts will be released but markets will be focused on the March international trade report on Wednesday,” says RBC Capital Markets.

“The hope is that the trade figures will reveal that Canada is leveraging off the strong recovery building south of the border.” Also, auto sales are out on Thursday and merchandise trade data is due Friday.

“It’s a week of steady as she goes for economic news,” CIBC World Markets predicts. “While housing starts will ease, that’s only because the prior month was in the stratosphere. Factory shipments and auto sales will extend the prior month’s upturn, and we don’t see any significant swing in what is a healthy trade balance.”

BMO Nesbitt Burns is looking for a modest 0.5% rise in exports, while imports are expected to rise closer to 2%. “This combination would trim the trade surplus to $5.3 billion from $5.7 billion the prior month, but still above the $5 billion average of the past year,” it says. “Canadian shipments are expected to rise 1%, and new orders could be stronger at +2%, especially since U.S. factory orders jumped 4.3% in the month.”

Nesbitt also notes that, for the first time, the Bank of Canada will make the results of its quarterly Business Outlook Survey public on Thursday. “The survey of about 100 private sector businesses asks about general conditions, spare capacity, labour shortages, and the inflation outlook, among other issues,” it explains. “The survey is one of the four key inputs into the Bank’s decision-making policy, and is likely to become a closely-watched release for Canadian analysts in the years to come.”

South of the border

In the U.S., the weekly economic data schedule is back-end loaded. The goods and services balance is out on Wednesday. Thursday brings retail sales and the producer price index. The consumer price index is out on Friday, along with industrial production, business inventories and the Michigan sentiment index.

“In the U.S., there’s been fear and loathing in the bond market after so many strong data reports, and equities haven’t liked the news a whole lot better. The week ahead will see a bit of calmer waters on that score,” CIBC says.

“Market reaction to a pull back in retail sales should be muted given that it comes after huge March gains. But if we’re right about a 0.1% reading on core CPI, there will be a sigh of relief over inflation, even as energy prices take the 12-month headline rate to 2.4%. Energy will become more of a negative story in the trade and current account balances in the months ahead, and gas prices could also temper what might have otherwise been a very strong monthly jump in consumer confidence.”

Nesbitt agrees that this week’s report on retail sales will be weak (at least in headline). It says retail sales are expected to drop 0.2% in April after soaring 1.8% in March. On Friday, it looks for the all-items CPI to increase 0.3%. And, core CPI is expected to increase 0.2%, “slower than the prior month’s 0.4% shocker”.

However, Nesbitt warns that the trend in core inflation is definitely on the rise. “The bubbling of inflation pressure should be even more noticeable up the production pipeline, with Thursday’s release of producer prices. We look for the PPI to post 0.3% increases for both all-items and core finished goods prices.”

On Friday, industrial production should bounce back, advancing 0.5% in April after falling 0.2% in March, it says. And, the University of Michigan’s consumer sentiment index is expected to increase to 96.1 in May.

Corporate earnings

The earnings schedule remains reasonably active this week, too. APF Energy Trust, Eldorado Gold, Intrawest, Kinross Gold and TLC Vision report on Monday.

Canadian Tire, Meridian Gold and CP Ships report Tuesday.

Wednesday brings Allstream, CAE, Cambior, Industrial-Alliance Life Insurance and George Weston.

Sleeman Breweries leads off on Thursday, along with Boardwalk Equities, Clearwater Seafoods Income Fund, Focus Energy Trust, and Yellow Pages Income Fund.

On Friday, Advantage Energy Income Fund, Inter Pipeline Fund, Northland Power Income Fund, Petrofund Energy Trust and Viking Energy Royalty Trust are all on deck.

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