US: Real economy isn’t as bad as advertised – NFB

According to National Bank of Canada analyst, Krishen Rangasamy, the US economy is not as bad as “advertised” taking into account today’s numbers from retail sales and industrial production. He points out consumer strength is offsetting weakness in factory activity.

Key Quotes:

“Don’t write off the U.S. economy so fast. Granted, these days it’s easy to be pessimistic with the ongoing trade war, stock market plunge and the herd screaming “yield curve inversion”. And disappointing data such as this morning’s industrial production, which showed manufacturing contracting in July on a year-on-year basis, may reinforce bearish sentiment. But at this point the real U.S. economy isn’t as bad as advertised. Note that manufacturing sector woes aren’t a U.S.-specific issue considering the escalating trade war has hit supply chains and hence factories around the world. What gives us encouragement about the U.S. is its consumers.”

“A buoyant labour market, an upwardly revised personal savings rate, positive housing wealth effects, low debt relative to net worth, declining interest rates and a sound financial system which continues to allow for healthy credit growth, all suggest there is room for consumption to thrive.”

“Discretionary retail sales continue to grow at a solid pace, providing more than just an offset to a struggling manufacturing sector. So, while the U.S. economy is set to move down a gear after registering above potential growth in the first half of the year, don’t expect an outright collapse just yet.”