Daily Insight
Group Economics Macro & Financial Markets Research Maritza Cabezas & Arjen van Dijkhuizen
The US consumer comeback
+31 20 343 5618 ,
12 June 2015 • • •
Strong May retail sales signal rebound of consumer spending… …adding to the case for Fed rate increases later this year China’s May data provide some signs of economic stabilisation
The comeback of US consumers
US retails sales jump in May
After a weak start this year, US retail sales rebounded in May. Nominal retail sales increased 1.2% from an upwardly revised 0.2% in April. May was the strongest month for auto sales in a decade. Vehicle sales grew 2% and contributed 0.43% to the change in retail sales. Higher gasoline prices increased 3.7% and boosted the headline figure, contributing 0.31%. Core
% 3mo3m
20 10 0 -10
retail sales (excluding gasoline, autos, building materials and
-20
food services) which correspond to the consumer spending
-30
component of GDP, grew by 0.7% up from 0.1% the previous
-40
month. Solid retail sales, follow a strong labour market report, suggesting that economy is on firmer footing.
08
08
09
Retail sales
10
11
12
13
14
15
Retail sales ex-gas and vehicles
Source: Thomson Reuters Datastream, ABN AMRO Group Economics
US households in better shape Indeed, household fundamentals have improved and leave them in a better position to spend. The ratio of household liquid
China’s May data provide signs of stabilisation …
assets to liabilities, as well as household purchasing power
After weak April data indicated that China’s economy started
and the rate at which they are saving, indicate that they are in
Q2 on a weak note, May data show signs the economy is
excellent shape. In addition, the ratio of household debt to
stabilising, benefiting from previous easing measures. Still, the
disposable income is down roughly 25 percentage points from
latest data present a rather mixed bag. PMIs, housing sales,
its peak (98%). If we are right, households should also receive
industrial production and retail sales show a picture of
a boost from an acceleration in wages in coming months, while
stabilisation or even improvement, while trade data, headline
job growth should remain robust. We expect consumers to
inflation and fixed investment point to ongoing weakness.
provide a tailwind for underlying economic activity going forward.
… although presenting a rather mixed bag The high frequency activity data published on Thursday
Fed set for rate hike
generally showed a somewhat firmer trend than in April.
Chair Yellen in her most recent intervention said that if the
Industrial production growth rose further in May to 6.1% yoy
labour market strengthening is confirmed and inflation readings
(April: 5.9%), which was slightly better than expected. Retail
continue to improve, lift-off would likely come before the end of
sales rose marginally to 10.1% yoy (April: 10%). By contrast,
the year. Other data released on Thursday, showed that import
fixed investment continued its downward trend, reaching a low
prices rose in May by 1.3% from -0.2% the previous month.
of 11.4% yoy in May (April: 12%). Bloomberg’s monthly GDP
This marked the first increase since June 2014 and the
estimate rose to 6.55% yoy in May (April: 6.4%).
sharpest rise in more than three years. Although this is partly a result of higher oil prices, we expect core inflation to continue
Stimulus will keep growth on track for 7% target
to pick up at a modest pace. Next week’s FOMC meeting will
We expect some improvement in growth momentum in the
shed more light on where the FOMC members stand. We think
second half, as the authorities remain committed to add
that these reports will give more confidence to Fed
measured monetary and fiscal stimulus, while we also see a
policymakers that the economy is on the right track, setting the
strengthening of external demand from advanced economies.
scene for a rate hike in September.
We have left our growth forecast for 2015 unchanged at 7%, in line with the official target.