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15 Apr 2015
Weaker than expected US retail sales leads to a lower revision in GDP forecast – Danske
FXStreet (Barcelona) - Signe Roed-Frederiksen, Senior Analyst at Danske Bank, reviews the US retail sales data release and further shares the forecasts for private consumption and GDP.
Key Quotes
“US retail sales rebounded in March but not as much as we had expected. Headline sales increased 0.9% m/m due to a surge in auto sales, which were up 2.7% m/m and sales of building materials up 2.1% m/m.”
“The control group (sales excluding autos, building materials, gasoline and food) increased a more modest 0.3% and there were downward revisions in February (-0.26pp) and January (-0.12pp).”
“This means that private consumption growth in Q1 is now tracking 2.0% q/q annualised and incorporating the weakness in export data, durable goods orders and structures as well, we take down our Q1 GDP growth estimate to 0.8% q/q AR from 1.7% q/q AR.”
“For Q2, it will be difficult to reach GDP growth of 3.0% q/q AR, with private consumption heading into the quarter on a weak note, so we adjust our forecast to 2.8%. This leaves overall GDP growth at 2.5% in 2015.”
“The trend in retail sales over the past three months has been extremely weak when looking at it in nominal terms but some of this weakness is caused by significant deflation in goods prices. Real retail sales (deflated by core goods CPI) have increased around 5% annualised over the past three months, which is not weak in an historical context.”
“The surprise is that US consumers have not reacted more positively to the combination of a significant boost to real incomes from lower gasoline prices, increasing wealth, high consumer confidence and decent job growth. Economic theory would suggest that private consumption growth should have been around 5% q/q AR in Q1. Instead, the personal savings rate has spiked and is now close to 6%.”
Key Quotes
“US retail sales rebounded in March but not as much as we had expected. Headline sales increased 0.9% m/m due to a surge in auto sales, which were up 2.7% m/m and sales of building materials up 2.1% m/m.”
“The control group (sales excluding autos, building materials, gasoline and food) increased a more modest 0.3% and there were downward revisions in February (-0.26pp) and January (-0.12pp).”
“This means that private consumption growth in Q1 is now tracking 2.0% q/q annualised and incorporating the weakness in export data, durable goods orders and structures as well, we take down our Q1 GDP growth estimate to 0.8% q/q AR from 1.7% q/q AR.”
“For Q2, it will be difficult to reach GDP growth of 3.0% q/q AR, with private consumption heading into the quarter on a weak note, so we adjust our forecast to 2.8%. This leaves overall GDP growth at 2.5% in 2015.”
“The trend in retail sales over the past three months has been extremely weak when looking at it in nominal terms but some of this weakness is caused by significant deflation in goods prices. Real retail sales (deflated by core goods CPI) have increased around 5% annualised over the past three months, which is not weak in an historical context.”
“The surprise is that US consumers have not reacted more positively to the combination of a significant boost to real incomes from lower gasoline prices, increasing wealth, high consumer confidence and decent job growth. Economic theory would suggest that private consumption growth should have been around 5% q/q AR in Q1. Instead, the personal savings rate has spiked and is now close to 6%.”