Daily Insight
Group Economics Macro & Financial Markets Research
1 June 2016
US consumers revive Maritza Cabezas Senior Economist Tel: +31 20 343 5618
US consumption growth was weak in the past few quarters…
…but incoming data suggest that the pause in consumption was likely
maritza.cabezas@nl.abnamro.com Aline Schuiling
transitory
Senior Economist
fragile
Tel: +31 20 343 5606 aline.schuiling@nl.abnamro.com
Risks of a rate hike have increased, but US economy and markets remain
Eurozone credit growth continues to rise moderately …
… while German retail sales drop
US consumption growth was weak in the past few quarters… Consumption growth has been weak in the past few quarters, despite the strong job market and higher disposable income resulting from lower gasoline prices. Data suggest that US households opted to increase their savings rather than boost consumption. The personal savings rate increased 1.1ppts in the past year. …but incoming data suggest that the pause in consumption was likely transitory However, the most recent consumption data has been more positive. US retail sales surged in April as did consumer confidence in May. Meanwhile, data released on Tuesday showed that US consumer spending increased to 1% in April from 0.1% the previous month. Adjusted for inflation consumer spending rose 0.6% in April, up from 0% the previous month. This same report showed that the savings rate dropped to 5.4% down from 5.9% the previous month. At the same time, the report showed that core PCE, the preferred inflation measure of Fed policymakers, increased by 1.6% yoy in April, the same rate as in the previous month. This is still below the Fed’s goal. On a month on month basis core PCE increased 0.2% from 0.1% the previous month, suggesting that inflation pressures are still manageable. Positive economic data suggest that risks of a rate hike this year have increased Our base scenario sees moderate growth in consumption resulting from a still healthy labour market, albeit with more modest job growth than in the previous years. This will continue to offset weaker investment growth, resulting partly from the fall in energy prices. Indeed investment in mining has been a drag for GDP growth of around 0.35 ppts on average in the past year. We expect investment growth to only slowly recover as oil gradually prices pick up and the impact of the strong US dollar fades. All in all, the recent economic data have been positive and the risks for a rate hike in the near term have increased. However, we still think that the US and global economy, as well as financial markets are vulnerable and the Fed will remain on hold this year.
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Daily Insight – US consumers revive – 1 June 2016
Eurozone credit growth continues to rise moderately The ECB’s report about monetary developments in the euro area showed that growth in credit to non-financial companies has continued to rise gradually. The annual growth rate (adjusted for sales and securitisation) rose to 1.2% in April, up from 1.1% in March. Meanwhile, growth in loans to households slowed down a touch, to 1.5% from 1.6%. The changes in loan growth seem to reflect the results of the ECB’s latest Bank Lending Survey for the eurozone, which showed that banks reported that demand for credit from both companies and households increased in Q1, while banks on average eased credit standards on loans to companies and on consumer credit, while they tightened standards on mortgages somewhat. We expect credit growth to continue to rise gradually in the coming months, particularly loans to companies. Indeed, we expect fixed investment growth to continue to recover in the coming quarters, whereas private consumption growth, which was buoyant last year, should slow down somewhat.
Eurozone bank lending annual growth, %
3 2 1 0 -1 -2 -3 -4 10
11
12
13
14
15
16
Loans to non-financial corporations Loans to households Source: Bloomberg
German retail sales plummet Meanwhile, the evidence is building that German GDP growth weakened in Q2, following the surprisingly strong 0.7% qoq expansion in Q1. The volume of German retail sales fell by 0.9% mom in April after it contracted by 1.4% in March. As a result the 3M-o-3M growth rate dropped to -0.7% in April, down from 0.4% in March, implying that consumption started Q2 on a weak note. Nevertheless, ongoing robust employment growth should continue to support expenditure and we expect consumption to expand solidly later in the year.
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Daily Insight – US consumers revive – 1 June 2016
Day
Date
Time
Country
Monday Monday Monday Monday Monday
30/05/2016 30/05/2016 30/05/2016 30/05/2016 30/05/2016
02:35:00 06:30:00 11:00:00 14:00:00
US NL EC DE BE
Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday
31/05/2016 31/05/2016 31/05/2016 31/05/2016 31/05/2016 31/05/2016 31/05/2016 31/05/2016 31/05/2016 31/05/2016 31/05/2016 31/05/2016 31/05/2016
01:30:00 01:50:00 09:55:00 10:00:00 11:00:00 11:00:00 11:00:00 14:00:00 14:30:00 14:30:00
Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday
Key Economic Indicators and Events
Period
Latest outcome
Consensus
ABN AMRO
Fed's Bullard speaks Producer confidence manufacturing - index Economic sentiment monitor - index CPI - % yoy CPI - % yoy
May May May P May
4.4 104.7 0.1 2.0
104.2 0.1
4.2 104.5 0.2
15:45:00 16:00:00
JP JP DE EC EC EC EC IN US US US US US
Unemployment - % Industrial production - % mom Unemployment - % M3 growth - % yoy Core inflation - % yoy CPI - % yoy Unemployment - % GDP - % yoy PCE deflator core - % mom PCE deflator core - % yoy S&P/Case Shiller house price index Chicago Fed - business confidence - index Conference Board cons. confidence - index
Apr Apr P May Apr May A May Apr 1Q Apr Apr Mar May May
3.2 0.3 6.1 4.6 0.8 -0.1 10.2 7.3 0.2 1.6 0.9 49.3 92.6
01/06/2016 01/06/2016 01/06/2016 01/06/2016 01/06/2016 01/06/2016 01/06/2016 01/06/2016 01/06/2016 01/06/2016
03:00:00 03:00:00 03:45:00 09:00:00 10:00:00 10:30:00 14:00:00 15:45:00 16:00:00 20:00:00
CN CN CN NE EC GB BR US US US
PMI manufacturing - index (official) PMI non-manufacturing - index (official) PMI manufacturing - index (Caixin) PMI PMI manufacturing - index PMI manufacturing - index GDP - % yoy Markit - Flash PMI ISM manufacturing - index Fed Beige Book
May May May May May F May 1Q May F May
50.1 53.5 49.4 52.6 51.5 49.2 -5.9 50.5 50.8
51.5
50.7
50.5
Thursday Thursday Thursday Thursday Thursday Thursday
02/06/2016 02/06/2016 02/06/2016 02/06/2016 02/06/2016 02/06/2016
13:45:00 13:45:00 13:45:00 14:15:00 14:35:00 19:00:00
EC EC EU US US US
ECB Main Refinancing Rate - % ECB Deposit Facility Rate - % ECB Marginal Lending Facility Rate - % ADP nat. employment report - thousands Fed's Powell discusses Prudential regulation (v) Fed's Kaplan speaks on economy (nv)
Jun 2 Jun 2 Jun 2 May
0.0 -0.4 0.25 155.7
0.0 -0.4 0.25 180
0.0 -0.4 0.25 165.0
Friday Friday Friday Friday Friday Friday Friday Friday Friday Friday Friday Friday
03/06/2016 03/06/2016 03/06/2016 03/06/2016 03/06/2016 03/06/2016 03/06/2016 03/06/2016 03/06/2016 03/06/2016 03/06/2016 03/06/2016
03:45:00 03:45:00 09:45:00 10:00:00 10:00:00 10:30:00 11:00:00 14:30:00 14:30:00 14:30:00 14:30:00 16:00:00
CN CN US EC EC GB EC US US US US US
PMI services - index (Caixin) PMI composite - index (Caixin) Fed's Evans speaks on economy and policy (nv) Composite PMI output PMI services - index PMI services - index Retail sales - % mom Trade balance - USD bn Change in employment private employment - thousands Change in employment total - thousands Unemployment - % ISM non-manufacturing, index
May May
51.8 50.8
May F May F May Apr Apr May May May May
52.9 53.1 52.3 -0.5 -40.4 171 160 5.0 55.7
2.8 6.2 5.0 0.8 -0.1 10.2 7.5 0.2 1.6 0.7 54.9 96.8
6.2 5.0 0.7 -0.2 10.2 7.5
95.0
50.0 49.2 53.0
52.9 53.1 0.3 -43.1 163 174 5.0 55.7
0.2 160 170 5.0 55.0
Source: Bloomberg, Reuters, ABN AMRO Group Economics (we provide own forecasts only for selected k ey variables and events)
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