Daily Insight
Group Economics Macro & Financial Markets Research
14 April 2016
US economy set for a weak Q1 Maritza Cabezas Senior Economist Tel: +31 20 343 5618 maritza.cabezas @nl.abnamro.com
Disappointing US retail sales, add to signs of a weak Q1 GDP growth
China’s trade data better than expected, but should still be interpreted with care
Eurozone industrial production declined in February …
… but incoming data suggest Q1 GDP growth was lifted by temporary factors
Arjen van Dijkhuizen Senior Economist Tel: +31 20 628 8052
US retail sales disappoint in March
arjen.van.dijkhuizen @nl.abnamro.com
The pattern of first quarter US GDP growth weakness will likely repeat again. The latest
Aline Schuiling Senior Economist
report, March US retail sales, a barometer for consumer spending, was weaker than expected. Retail sales declined by 0.3%, down from a revised -0.1% (initially 0%) the
Tel: +31 20 343 5606
previous month. Spending on gasoline increased, likely a result of higher gasoline prices,
aline.schuiling@nl.abnamro.com
but vehicles sales plummeted. These had been particularly strong in the first part of the year with support of price discounting and other incentives. Core retail sales, which is more closely related to the consumer spending component of GDP, increased by 0.1%, the same rate as in the previous month. This suggest underlying consumer spending trends remain weak. Fed will become even more cautious as consumers hold on to their purses The Fed looks closely at consumer spending to measure the pulse of the economy. US consumer spending accounts for about 70% of economic output. Fed policymakers generally, are expecting consumer spending to rise moderately, given the strong labour market. The recent report, indeed contrasts with the improvement in employment and income, that is resulting from the lower energy prices. We expect consumer spending to pick up in the coming quarters moderately. We expect GDP growth to be around 1% in the first quarter. This is a sign that the US economy is not yet ready for a rate hike. We expect the Fed to remain on hold in the coming months.
China’s exports show annual growth in March, for first time since June 2015 China’s export data published on Wednesday brought a positive surprise, after being pretty lacklustre in early 2016. After contracting by more than 25% yoy in February, merchandise exports in USD terms jumped by 11.5% yoy in March (market consensus: +10% yoy). However, jumping to strong conclusions is not appropriate. China’s trade data at the start of the calendar year are always distorted by the fact that the timing of the Lunar Year break differs each year. As a result of timing differences, exports showed a very strong rise in February 2015, but were very weak in March 2015. These base effects affect the 2016 figures. All in all, it is still too early to cry victory, although tentative signs
Insights.abnamro.nl/en
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Daily Insight – US economy set for a weak Q1– 14 April 2016
that global demand might be stabilising and the fact that the real effective appreciation of the yuan has come to an end should be supportive for China’s exports going forward. Bottoming out of China’s imports looks to have continued in March Meanwhile, China’s merchandise imports fell by 7.6% yoy, which was clearly below the average of -16.3% yoy in January/February and the average of -14% in 2015. These data should also be interpreted with caution, given distortions related to the timing of the Lunar New Year, the impact of lower (commodity) prices and the effects from overinvoicing practices (and the curtailment thereof). Still, looking at several volume indicators, there are signs that the bottoming out of China’s imports has indeed continued. This would also be in line with recent macro economic indicators, pointing to an improving momentum in China’s domestic demand on the back of ongoing fiscal and monetary stimulus. We expect China’s slowdown to remain gradual, with growth falling from 6.9% in 2015 to 6.5% in 2016, and China’s imports to bottom out this year.
China’s trade data better than expected in March % yoy
60 40 20 0 -20 -40 11
12
13 Export growth
14
15
16
Import growth
Source: Thomson Reuters Datastream
Eurozone industrial production growth probably stronger in Q1 …. Industrial production in the eurozone fell by 0.8% mom in February, following a 1.9% rise in January (revised down from 2.1%). The decline in February probably was largely due to a drop in construction output (this series has not yet been published, although it is included in total industrial output), which rose by 3.6% mom in January due to the exceptionally mild winter. Thanks to the strong start of the year, industrial production probably accelerated during Q1 as a whole. Even if it were to stabilise in March, or fall by another 0.8% mom that month, its quarterly growth rate would still be higher in Q1 than the 0.4% qoq that was recorded in 2015Q4. Having said that, this higher growth rate would be in conflict with the manufacturing PMI and the EC’s industrial confidence indicator, which both came down significantly during the first quarter of the year. Therefore, it is likely that growth in industrial production will slow down again in Q2.
… boding well for Q1 GDP growth Besides industrial production, consumption growth seems to have picked up as well in Q1. Both retail sales and new passenger car registrations ended 2015 on a very strong note (+0.6% mom and +5% mom, respectively in December), implying there is a positive statistical impact on Q1 growth. Although growth in both series weakened in JanuaryFebruary, car sales and retail sales are likely to have still accelerated during Q1 as a
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Daily Insight – US economy set for a weak Q1– 14 April 2016
whole. Also because there might have been a one-off positive impact on expenditure of the early timing of Easter in March. However, similar to industrial production, we expect a stronger Q1 to be followed by a slowdown in Q2. Indeed, consumer confidence has fallen non-stop in the first three months of this year. Taking all incoming economic data for the first months of this year into consideration, there seems to have been a pick-up in GDP growth in Q1, following the 0.3% qoq that was registered in 2015Q4. However, we think this pick-up will only be temporary and will be followed by weaker growth in Q2.
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Daily Insight – US economy set for a weak Q1– 14 April 2016
Day
Date
Time
Country
Monday Monday Monday Monday Monday
11/04/2016 11/04/2016 11/04/2016 11/04/2016 11/04/2016
01:50:00 03:30:00 03:30:00 15:25:00 19:00:00
JP CN CN US US
Machinery orders private sector - % mom CPI - % yoy PPI - % yoy Fed's Dudley (voter) speaks in NY Fed's Kaplan (non-voter) in Louisana
Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday
12/04/2016 12/04/2016 12/04/2016 12/04/2016 12/04/2016 12/04/2016 12/04/2016
10:30:00 12:00:00 14:00:00 15:00:00 21:00:00 22:00:00
DE GB US IN US US US
CPI - % yoy CPI - % yoy NFIB small business optimisme - index CPI - % yoy Fed's Harker (non-voter) speaks on Economic Outlook Fed's Williams (non-voter) speaks Fed's Lacker (non-voter) speaks
Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday
13/04/2016 13/04/2016 13/04/2016 13/04/2016 13/04/2016 13/04/2016 13/04/2016 13/04/2016 13/04/2016 13/04/2016 13/04/2016 13/04/2016 13/04/2016
15/04/2016 15/04/2016 15/04/2016
CN CN CN CN CN EC EC US US US CA US US
New loans - CNY bn Aggregate financing - CNY bn M2 money growth - % yoy Exports - % yoy Imports - % yoy ECB's Knot in Dutch Parliament to discuss ECB Monetary Policy Industrial production - % mom Retail sales - % mom Prod. prices index excl food and energy - % mom Prod. prices index - % mom Policy rate - % Business inventories - % mom Fed's Beige Book
Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday
14/04/2016 14/04/2016 14/04/2016 14/04/2016 14/04/2016 14/04/2016 14/04/2016 14/04/2016 14/04/2016
11:00:00 13:00:00
EC GB GB US US US US US US
Friday Friday Friday Friday Friday Friday Friday Friday Friday Friday
15/04/2016 15/04/2016 15/04/2016 15/04/2016 15/04/2016 15/04/2016 15/04/2016 15/04/2016 15/04/2016 15/04/2016
CN CN CN CN JP EC US US US US
10:00:00 11:00:00 14:30:00 14:30:00 14:30:00 16:00:00 16:00:00 20:00:00
14:30:00 14:30:00 14:30:00 14:30:00 16:00:00 16:00:00 04:00:00 04:00:00 04:00:00 04:00:00 11:00:00 14:30:00 15:15:00 16:00:00 18:30:00
Key Economic Indicators and Events
Period
Latest outcome
Consensus
Feb Mar Mar
-9.2 2.3 -4.3
-11.9 2.4 -4.6
Mar F Mar Mar Mar
0.3 0.5 92.6 4.8
0.3 0.4
Mar Mar Mar Mar Mar
726.6 780.2 13.3 11.5 -7.6
1100.0 1400.0 13.5 10.0 -10.1
Feb Mar Mar Mar Apr 13 Feb
-0.8 0.2 -0.1 -0.1 0.5 -0.1
-0.6 0.2 0.1 0.3 0.5 0.0
Core inflation - % yoy Policy rate - % BoE size of asset purchase programme - GBP bn Inflation excl food and energy - % mom Inflation excl food and energy - % yoy Inflation (CPI) - % mom Inflation (CPI) - % yoy Fed's Lockhart (non-voter) speaks Fed's Powell (voter) appears before Senate Banking Committee
Mar F Apr 14 Apr Mar Mar Mar Mar
1.0 0.5 375.0 0.3 2.3 -0.2 1.0
1.0 0.5 375.0 0.2 2.3 0.3 1.1
0.2 2.3 0.3 1.1
Retail sales - % yoy Industrial production - % yoy Fixed investments - % yoy GDP - % yoy Industrial production - % mom Trade balance external EU - EUR bn Empire State PMI - Manuf. general business conditions - index Industrial production - % mom Univ. of Michigan cons. confidence - index Fed's Evans (non-voter) speaks on Economy and Policy
Mar Mar Mar 1Q Feb F Feb Apr Mar Apr P Apr P
10.2 5.4 10.2 6.8 -6.2 21221.2 0.6 -0.5 91.0 91.0
10.4 6.0 10.4 6.7
6.7
1.3 -0.1 92.2 92.2
-0.2 93.0 93.0
ABN AMRO
5.0
Source: Bloomberg, Reuters, ABN AMRO Group Economics (we provide own forecasts only for selected k ey variables and events)
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