James Smith, developed markets economist at ING, points out that the latest US retail sales numbers showed that the headline spending figure dipped by 0.2%, masking a fairly noticeable fall in car sales, which was more-or-less offset by greater spending at gasoline stations.

Key Quotes

“It’s worth noting that this latest decline comes after a very strong month for consumer spending in March, and more generally, we think the outlook for retail sales looks reasonably good. While wage growth has levelled off a bit since the start of the year, the tight jobs market and associated skill shortages should continue to keep the pressure on employers to lift pay faster to attract/retain talent.”

“There are a couple of headwinds to spending though. The sudden rise in fuel prices will hit real wages to some degree, while the lingering threat of tariffs on the remainder of Chinese imports could also weigh on spending if they come to pass.”

“We are expecting 2.5% overall growth in 2019, which when combined with our forecast for a gradual rise in core inflation, suggests that Fed rate cuts are not currently on the horizon.”

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