Will retail sales increase after two months of decline?
US retail sales data for April, to be released on Tuesday, will offer insight into the sentiment among consumers as inflation cools.
Economists polled by Reuters expect the Census Bureau to report a 0.7% rise in overall retail sales from a month earlier, following two months of declines. This will also reverse the 0.6% decline in March.
Credit Suisse analysts expect the increase to be driven by robust auto and fuel spending. The number below, which excludes auto-related spending, is expected to be weaker. The broker expects a 0.2% drop in that metric month-over-month.
The outlook for retail sales is mixed strength in the labor market and wages will likely support consumer spending. However, it comes amid expectations of a recession, tightening financial conditions and slowing inflation, all of which tend to curb spending.
The retail sales data comes after the Bureau of Labor Statistics last week reported that US inflation slowed its growth more-than-expected in April as interest rate hikes from the Federal Reserve continue to dent the price increase. Small price increases typically slow growth in retail spending. Kate Duguid
How fast did the Japanese economy grow in the first quarter?
Japan’s economy is under pressure from an unstable post-Covid rebound in consumption, faltering real wages and weak demand for its exports.
Real household spending unexpectedly fell 1.9% year on year in March, dent the momentum of an ongoing recovery as the country lifted most of its coronavirus caps and travel restrictions.
Real wages also marked their 12th consecutive month of decline, with wages struggling to keep pace with inflation, despite the attention-grabbing increases from some of the biggest brands in the country. Merchandise exports, meanwhile, were hurt by weak global demand, particularly from China.
UBS, the Swiss brokerage, lowered its growth forecast from a seasonally adjusted annual rate of 1%, quarter on quarter, down from an earlier estimate of 2%.
But he thinks there are reasons to believe that economic growth will continue throughout the year. It points to the pent-up demand created by the delayed reopening of the pandemic, the strong potential for inbound tourism and the likelihood of a rebound in real wages as lower import prices ease inflation.
“Going forward, we think the economic recovery will continue even with the headwinds of a slower global economy,” he wrote.
Goldman Sachs analysts agree, revising their GDP growth forecast to 1.1% from 1.7%, based on a “mixed picture” presented by March economic data, but still expecting a “responsive recovery ” since the last quarter of the year. William Langley
Can the Mexican peso continue its run?
The Mexican peso has emerged as the leading, best-performing emerging-market currency this year, as high interest rates, rising remittances and its proximity to a strong US economy have made it an investor favorite.
The peso is up 10.8% this year, trading at 17.6 against the dollar, its highest level since 2017. But analysts warn that with a recession looming in the US, it could be nearing its peak.
Oliver Harvey, chief executive of Deutsche Bank, said the peso looks “among the most expensive emerging market currencies” and would not expect it to outperform other currencies in the second half of the year, as it has in recent months.
The caution comes as hedge funds increased their bets against Mexico, with $4.8 billion of government bonds on loan in May, up from a low of $2.7 billion in February this year, according to data from S&P Global Market Intelligence.
The peso is one of the emerging market currencies most sensitive to the slowdown in the US economy.
Brent David, senior portfolio manager at RBC BlueBay, said a hard landing in the US, prompted by debt ceiling concerns or tightening credit conditions, “would be extremely damaging to the peso.” Mary McDougall
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