The United States is beginning to underperform other developed countries as several economic indicators point to a slowdown.
Earlier this week the United States Census Bureau reported retail sales stagnated in April, despite expectations of a 0.2% rise in spending as more employment encouraged greater spending. Instead, consumers are limiting their discretionary spending in a trend that has established itself over the last year.
Anyone who has looked at the cost for rent in New York, San Francisco, and similar cities knows just how expensive it can be to live in these towns. But, could these high rents actually be hurting the economy?
Retail sales failed to rise in April, causing the Federal Reserve to lower its GDP forecast as Americans are slow to spend and stimulate the consumer-driven economy.
The combination of the disappointing US retail sales and small inventory build has encouraged a new bout of dollar selling. The world’s biggest economy may have contracted close to 1% in Q1 and Q2 is off to a weak start.
Equities and bond markets are mostly trading higher today. The dollar changed little against the euro and yen, but it is softer against the dollar-bloc. Sterling extended is a post-election rally with the help of a gain in average weekly earnings, but returned offered after a somewhat more dovish BOE Quarterly Inflation Report.
France GDP grows 0.6% in first quarter of 2015, above estimates of 0.4%. Lower oil prices and a weaker euro helped exports, driving a higher growth rate than the European country has seen for two years. Some analysts believe this could be the beginning of a recovery after three years of stagnation.
The US dollar has begun the new week on firm footing, but the tone is more consolidative than trending. The dollar-bloc currencies, led by the New Zealand dollar, are particular softer despite China’s rate cut, which sometimes has been supportive for commodity-linked currencies. Emerging market currencies did not get much of a boost either.
1. After the US economy appears to have contracted (-0.5%/-0.8%) in the first quarter, how is the economy doing here in Q2 which is half over this week?
Last week we learned that after a simply dismal March labor report, April job growth bounced back above 200k. The May employment survey comes in the week ahead. Weekly initial jobless claims have fallen to new cyclical lows, as has the unemployment rate.
The consensus for a 226k increase in April non-farm payrolls got as close as reasonably possible to the actual 223k increase. The nearly 40k downward revision to the March report (85k down from 126k of the initial estimate) tempered the positive news. However, the unemployment rate slipped to 5.4% from 5.5% despite the 0.1% increase in the participation rate. Average hourly earnings increase by a meager 0.1% on the month for a 2.3% year-over-year pace.
For many Americans, the value of the dollar in trade terms is a point of pride. Older generations remember a time when they could buy things for a fraction of what they cost today. Many view a strong dollar as a positive condition and something for which the nation should strive.
