Daily Insight US strong despite turmoil
Group Economics Macro & Financial Markets Research Maritza Cabezas & Aline Schuiling, +31 20 343 5618
16 September 2015
US retail sales show signs of sustained economic growth… …despite turmoil in financial markets ZEW sentiment drops, while eurozone labour market continues to improve
Low gasoline prices continue to boost US consumption…
ZEW economic sentiment and DAX %mom
US retail sales growth was quite healthy in August, rising by 0.2% after 0.7% the previous month. Lower gasoline prices
1,500
had a depressing effect on retail sales values. Car sales
1,000
remained strong, rising 0.7%, after a 1.3% gain previously. This is a sign that consumers have the confidence to purchase big items. Core retail sales which strip out gasoline and autos, rose by 0.4%, after an upwardly revised 0.6% the previous month. This measure corresponds closely to the consumption component of GDP, suggesting strong growth ahead.
15
500 0
0
-500
-15
-1,000 -1,500
-30
-2,000 1/3/2011 1/3/2012 1/3/2013 1/3/2014 1/3/2015
-45
DAX (lhs)
…despite volatility in equity markets August was a month in which the US stock market faced rising
30
ZEW economic sentiment (rhs)
Source: Thomson Reuters Datastream
volatility, but this did not lead consumers to postpone purchases. A stronger dollar, seems to be having a larger effect in supporting consumers to buy more imported goods, while low gasoline prices are also giving households more purchasing power.
ZEW sentiment hit by worries about China, … Germany’s ZEW economic sentiment dropped to 12.1 in September, down from 25 in August. The survey is held amongst financial analysts and economists and is largely
Manufacturing sector the weak spot in the US economy Other reports released Tuesday showed that the US manufacturing sector continues to struggle. The Empire State manufacturing index was nearly unchanged at -14.7 in September. New orders and the employment index were weak. Still, official US industrial production numbers for August painted a somewhat more positive picture. Industrial production fell 0.4%, but that followed a 0.9% jump the previous month. Although both reports tend to be volatile,
driven by sentiment in financial markets. Therefore, the drop in September has to be seen in the light of the nervousness about China and emerging markets in general and in anticipation of the first rate hike by the Fed. Although the risks to German GDP growth are to the downside, we expect ongoing solid growth in the coming quarters. Growth will be supported by strong domestic demand in the main developed economies, as well as further monetary policy stimulus in the eurozone.
manufacturing has been weak. A strong dollar is likely to continue to weigh on manufacturing exports.
… while the eurozone’s labour market recovery continues Employment growth in the eurozone picked up to 0.3% qoq in
Fed to remain on hold this week The relatively small size of manufacturing compared to consumption, suggests that growth will remain robust in the coming quarters. Still, we think the Fed will keep rates on hold this week given the volatility in financial markets and downside risks emanating from the external environment, especially emerging markets. We see the first rate hike in December.
Q2, from 0.2% in Q1 and 0.1% in 2014Q4. Annual employment growth stabilised at 0.8%. We expect employment, which tends to lag behind changes in GDP by around two quarters, to gather momentum in the coming quarters. This was already pre-signalled by surveys such as the employment expectations in the EC economic sentiment indicator and the employment component of the composite PMI.