Group Economics
Daily Insight
Macro & Financial Markets Research Maritza Cabezas, Arjen van Dijkhuizen, &
US consumer comeback
Georgette Boele +31 20 343 5616
14 August 2015
US retail sales accelerated in July, boosting rate hike expectations After adjusting USD-CNY fixing for the third day in a row, China acts to ease devaluation fears Global investor sentiment looks to be entering calmer waters
US retail sales rebound in July
US retail sales rebound
Retail sales rebounded strongly in July, while June’s sales were revised up. Retail sales increased 0.6%. Meanwhile, core retail sales, excluding gas and cars, rose 0.3% up from 0.2% the previous month. This report adds to the picture of an economy growing above-trend, following the solid July employment report released last week. This gives more ground for the Fed to hike rates in September. Fed policymakers have mentioned that labour market would need to show “some” improvement before a rate hike. Gains in most retail categories
% 3mo3m, annualised 12 10 8 6 4 2 0 -2 -4 -6 09
10
11
Retail sales
12
13
14
15
Retail sales ex-gas and vehicles
Source: Thomson Reuters Datastream
The report showed solid growth in most retail categories. Consumers purchased more vehicles and building materials. Meanwhile, gasoline sales rose by 0.4% in July, much lower than the 1.8% the previous month. Lower oil prices will put downward pressure on gasoline prices at the pump this month.
After adjusting USD-CNY fixing again, … On Thursday, the PBoC raised the USDCNY fixing rate for the third day in a row, bringing the cumulative adjustment this week to 4.7%. This adjustment was in line with the central bank’s statement on Tuesday to bring the reference rate more
Strong labour market to boost consumption further
in line with actual market movements.
We expect the economy to strengthen in the second half of the year. Consumers should continue to spend given the ongoing improvement in the labour market and firmer wage growth. On top of this, low gasoline prices will increase the purchasing power of consumers.
… China eases devaluation fears However, the PBoC also took action to take away fears of a massive CNY devaluation, by stepping up (verbal) support. These actions helped the yuan to recover somewhat, bringing the total weakening versus the USD to 3% so far this week.
Fed rate hike likely in September We do not expect the devaluation of the yuan or concerns about China’s economic outlook to prevent the Federal Reserve from raising interest rates next month. Indeed, the improving US economic data flow is making a September move increasingly likely. Markets priced in a greater probability of a rate hike following the retail sales report, but a hike next month is still not fully priced in.
Market sentiment enters calmer waters The turnaround in US equities on Wednesday had a positive impact on sentiment in financial markets. In addition, the PBoC’s re-assurance of the yuan also spurred a more optimistic investor climate. As a result, equity markets generally firmed, US Treasury and German Bund yields moved higher, the US dollar recovered and gold prices moved lower. The stronger than expected US retail sales report even reinforced these moves. Going forward we expect the US dollar to strengthen on expectations of a start of the US tightening cycle in September.
2
US consumer comeback – 14 August 2015
Financial markets Currency markets
Close
Change 1 day
Change 5 days
Change YTD
EUR/USD USD/JPY
1.1156
0.0538
1.7234
124.41
-0.0161
0.1368
3.8654
AUD/USD
0.7371
0.1495
-0.6336
-9.8349
USD/CHF
0.9754
-0.1024
-0.8639
-1.9008
NZD/USD
0.6554
-0.2587
-1.0269
-15.9420
GBP/USD
1.5614
0.0192
0.7940
0.2375
USD/SGD
1.3976
0.0358
0.9097
5.4395
USD/CAD
Bond markets
1.3063
Close
0.0230
Change 1 day
-0.5179
Change 5 days
-7.7864
12.4086
Change YTD
2-year German Govt Bond yield
-0.2780
0.0060
-0.0360
-0.1800
10-year German Govt Bond yield
0.6300
0.0250
-0.0790
0.0890
Yield curve Germany
0.9080
0.0190
-0.0430
0.2690
2-year US Treasury Bond yield
0.7093
0.0020
-0.0076
0.0448
10-year US Treasury Bond yield
2.1818
-0.0036
0.0195
0.0106
Yield curve US
1.4725
-0.0056
0.0271
-0.0342
US 2-year sw ap rates
0.9522
0.0067
-0.0196
0.0579
US 10-year sw ap rates
2.2597
-0.0025
-0.0148
-0.0264
US sw ap curve
1.3075
-0.0092
0.0048
-0.0843
EU 2-year sw ap rates
0.0845
0.0025
-0.0035
-0.0905
EU 10-year sw ap rates
0.9790
0.0250
-0.0600
0.1670
0.8945
0.0225
-0.0565
0.2575
-0.0240
0.0000
0.0000
-0.1020
EU sw ap curve Euribor 3 Month ACT/360 ICE LIBOR USD 3 Month
0.3093
-0.0051
-0.0016
0.0537
JPMorgan EMBI Plus Sovereign S
417.2600
-2.1700
4.7700
29.8200
Equity markets
Close
Change 1 day % Change 5 days %Change YTD%
Nikkei 225
20,596
0.99
-0.62
Hang Seng Index
24,019
0.43
-1.46
1.75
Hang Seng China Enterprises Index
11,081
0.35
-0.11
-7.54
Australian Stock Exchange S&P/ASX 200 Index
5,388
0.01
-1.58
-0.42
Singapore Straits Times Index
3,092
0.99
-3.11
-8.12
Euro Stoxx 50 Index
3,516
0.91
-4.15
11.75
S&P 500 Index
2,083
-0.13
-0.01
1.19
MSCI World Daily Total Return Gross USD
786
0.04
-0.71
2.35
AEX Index
477
-0.09
-4.84
12.37
13
-0.88
-2.03
-29.74
Chicago Board Options Exchange Volatility Index
Commodity markets Reuters/Jefferies CRB Total Return Gold spot USD/Oz Generic first NYMEX Crude Light future Generic first Brent Crude Oil future LME Copper 3 Months Rolling Forw ard Generic first Wheat future Chicago Board of Trade Source Bloomberg
Close
18.02
Change 1 day % Change 5 days %Change YTD%
198
-0.54
-0.36
1,115
-0.04
1.88
-13.96 -5.92
42
-0.59
-4.31
-21.19
49
-0.89
-0.61
-14.15
5,185
-0.09
0.00
-17.70
503
2.23
-0.74
-14.67
3
US consumer comeback – 14 August 2015
Day
Date
Saturday Saturday
08/08/2015 08/08/2015
Sunday
09/08/2015
Monday Monday Monday Monday
Time
Country
Key Economic Indicators and Events
Period
Latest outcome
Consensus
CN CN
Exports - % yoy Imports
Jul Jul
-8.3 -8.1
-1.5 -8.0
03:30:00
CN
CPI - % yoy
Jul
1.6
1.5
10/08/2015 10/08/2015 10/08/2015 10/08/2015
15/08/2015 15/08/2015 15/08/2015 15:45:00
CN CN CN EC
M2 money supply - % yoy Aggregate financing - CNY bn New yuan loans - CNY bn ECB announces weekly QE details
Jul Jul Jul
13.3 718.8 1480.0
11.7 1000.0 700.0
Tuesday Tuesday Tuesday Tuesday
11/08/2015 11/08/2015 11/08/2015 11/08/2015
11:00:00 12:00:00 14:30:00
DE US US RU
ZEW index (expectation economic growth) NFIB small business optimisme - index Output per hour nonfarm business sector - % qoq GDP - % yoy
Aug Jul 2Q P 2Q A
25.0 95.4 1.3 -4.6
31 94.0
Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday
12/08/2015 12/08/2015 12/08/2015 12/08/2015 12/08/2015 12/08/2015 12/08/2015 12/08/2015
07:30:00 07:30:00 07:30:00 10:30:00 10:30:00 11:00:00 14:00:00 16:00:00
CN CN CN GB GB EC IN US
Industrial production - % yoy Retail sales - % yoy Fixed asset investment - % yoy Claimant count unemployment rate - % Change in claimant count - thousands Industrial production - % mom CPI - % yoy US Job Openings by Industry
Jul Jul Jul Jul Jul Jun Jul Jun
2.3 10.5 11.2 2.3 -4.9 -0.4 3.8 5249.0
6.6 10.6 11.5
Thursday Thursday Thursday Thursday
13/08/2015 13/08/2015 13/08/2015 13/08/2015
01:50:00 14:30:00 16:00:00
JP US US KR
Machinery orders private sector - % mom Retail sales - % mom Business inventories - % mom Policy rate - %
Jun Jul Jun Aug 13
-7.9 0.6 0.8 1.5
Friday Friday Friday Friday Friday Friday Friday Friday
14/08/2015 14/08/2015 14/08/2015 14/08/2015 14/08/2015 14/08/2015 14/08/2015 14/08/2015
07:30:00 08:00:00 08:30:00 09:30:00 11:00:00 14:30:00 14:30:00 15:15:00
FR DE IN NL EC US US US
GDP - % qoq GDP - % qoq Wholesale price index - % yoy GDP - % qoq GDP - % qoq Prod. prices index - % mom Prod. prices index excl food and energy - % mom Industrial production - % mom
2Q P 2Q P Jul 2Q P 2Q A Jul Jul Jul
0.6 0.3 -2.4 0.6 0.4 0.4 0.3 0.2
0.2
ABN AMRO
35
0.0
0.5
0.3 0.5
0.3 0.6
0.4
0.2 0.5
Source: Bloomberg, Reuters, ABN AMRO Group Economics (we provide own forecasts only for selected k ey variables and events)
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