19 Jan 2016
US: Ended the last week on a weak note - ING
FXStreet (Delhi) – Rob Carnell, Chief International Economist at ING, notes that the US December retail sales and industrial production data were both soft in their latest print.
Key Quotes
“US Retail sales for December were disappointing. The headline figure was in line with expectations at -0.1% MoM, but the core figures, which should have been lifted by the removal of falling dollar gasoline sales, were flat-to-down too, depending on which one of the myriad adjusted figures you choose. That said, whether you strip out autos, autos and gas or all of the above plus building materials, the results were still weak.
There is no single explanation for the weakness. Warmer-than-usual weather may have reduced spending on seasonal clothing, but doesn’t explain why auto sales were so much at odds with other auto sales data. Falling electronics sales are also hard to explain, as are food, miscellaneous sales, and general merchandise sales.
Industrial production was also very soft, falling by 0.4% MoM, with declines across all the major sub-groups. Manufacturing fell 0.1% MoM, for the second consecutive month, with motor vehicle production contracting sharply again. Utilities were also soft for a third consecutive month, probably not helped by warmer weather than has been usual for December in recent years.
Mining was also soft, the fourth month-on-month decline in a row, as it was hit by general commodity price weakness and cutbacks in production, though a separate oil production index from the Fed showed some increase in December.
The final significant release of the day – the University of Michigan confidence index – was about the only bright spot in an otherwise dismal set of figures, rising to 93.3 from 92.6 – above the consensus expectation for only a 0.3ppt rise. All of the gains were in the expectation component, with the current conditions index correcting lower after some recent increases. There was also a bigger than usual decline in the 1Yr ahead inflation expectations part of the Michigan survey.
Together with a depressed PPI release for December, and the soft activity data also released this week, this data makes recent chatter about a March rate hike from the Fed look quite misplaced. Indeed, even the two hikes we have priced for 2016 look a bit aggressive at the moment.”
Key Quotes
“US Retail sales for December were disappointing. The headline figure was in line with expectations at -0.1% MoM, but the core figures, which should have been lifted by the removal of falling dollar gasoline sales, were flat-to-down too, depending on which one of the myriad adjusted figures you choose. That said, whether you strip out autos, autos and gas or all of the above plus building materials, the results were still weak.
There is no single explanation for the weakness. Warmer-than-usual weather may have reduced spending on seasonal clothing, but doesn’t explain why auto sales were so much at odds with other auto sales data. Falling electronics sales are also hard to explain, as are food, miscellaneous sales, and general merchandise sales.
Industrial production was also very soft, falling by 0.4% MoM, with declines across all the major sub-groups. Manufacturing fell 0.1% MoM, for the second consecutive month, with motor vehicle production contracting sharply again. Utilities were also soft for a third consecutive month, probably not helped by warmer weather than has been usual for December in recent years.
Mining was also soft, the fourth month-on-month decline in a row, as it was hit by general commodity price weakness and cutbacks in production, though a separate oil production index from the Fed showed some increase in December.
The final significant release of the day – the University of Michigan confidence index – was about the only bright spot in an otherwise dismal set of figures, rising to 93.3 from 92.6 – above the consensus expectation for only a 0.3ppt rise. All of the gains were in the expectation component, with the current conditions index correcting lower after some recent increases. There was also a bigger than usual decline in the 1Yr ahead inflation expectations part of the Michigan survey.
Together with a depressed PPI release for December, and the soft activity data also released this week, this data makes recent chatter about a March rate hike from the Fed look quite misplaced. Indeed, even the two hikes we have priced for 2016 look a bit aggressive at the moment.”