Jump in US Manufacturing and consumer caution
|US retail sales rose 0.1% in value for May, worse than the 0.3% rise expected after a 0.2% decline a month earlier. Total sales were 2.5% higher than a year earlier, lagging the 3.3% inflation over the same period. In other words, there was a decline in consumption in real terms.
At first glance, this is surprising given that wages are adding at a 4.0% y/y rate, and employment is growing steadily. However, adding to the equation the soaring cost of servicing credit card debt and a very low savings rate by historical standards, things start to look up.
We don't see a decline in consumption as we do in times of crisis, but a clear slowdown that may precede it.
At the same time, gloomy thoughts about the US economy are tempered by an impressive 0.9% jump in industrial production for May. This is more than twice as strong as expected. The industrial production index rose to its highest level since October 2022 and is only 0.8% below its historical peak reached in September 2018.
In summary, today's package of statistics points to a consumer shift towards a savings model but also refutes the most pessimistic expectations of a recession with a strong gain in manufacturing. This combination of data favours extending current rate levels, providing no food for either hawks or doves.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.