FXStreet (Barcelona) – Economists at Deutsche Bank, review the US May retail sales data release and see the data corresponding to a real PCE growth of 2%-plus growth in the current quarter.
Key Quotes
“May retail sales were better than expected and impart modest upside risk to current-quarter GDP. Headline retail sales rose 1.2% and the prior two months were revised up by a cumulative 0.6%. More importantly, retail control, which is the core of the report and excludes automobiles, building materials and gasoline, was up 0.7%. This was also accompanied by upward revisions of +0.1% and +0.4% to April and March, respectively.”
“Recall that retail control is a key input into goods spending in the GDP accounts and the sturdy May reading is a positive development for Q2 consumer spending, which we currently project to grow at a 2.0% annualized rate.”
“At minimum, the upward revision to the March retail sales figures and firmer services spending evident in the Quarterly Services Survey imply that Q1 real GDP growth will likely be revised up to 0.0% when the final figures are released on June 24.”
“At present, the May level of retail control is up roughly 5.0% annualized from its Q1 average, which is the fastest pace of growth since Q2 2014 (6.9%).”
“Even with a modest bump up in inflation, yesterday’s retail sales data are consistent with real PCE growth of 2%-plus in the current quarter.”
“With personal consumption expenditures accounting for approximately 70% of real GDP, the latest data are a positive signal that the economy is rebounding from the weather-related plunge in Q1. This is important given that the Fed will release updated economic and financial forecasts at the conclusion of the June FOMC meeting next Wednesday.”
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