3 Numbers: US retail ray of hope, US jobless claims, US comfort index

By: mryash on 12:03 AM

By James Picerno

 Three US reports will provide deeper context for deciding if the economy is breaking free of its winter doldrums. The retail sales report for May is the main event, followed by the weekly releases on jobless claims and Bloomberg’s sentiment index which tracks the mood on Main Street.

 Retail sales will show if the US economy is breaking free of its winter doldrums.
Photo: iStock

US: Retail Sales (13:30 GMT) Economists are looking for a strong rebound in consumer spending after a run of weakness in recent months. Even if the projection for a 1.3% monthly increase holds up, the news won’t end the questions about the outlook for retail sales. But after three straight months of disappointing numbers, upbeat news in today’s profile for May will go a long way towards easing fears that consumption was sliding over to the dark side.

One source of support for thinking positively is the encouraging gain in payrolls last month —nonfarm employment in May posted its biggest monthly advance so far this year. Meanwhile, yesterday’s release on job openings for April suggests that the labour market will continue to grow at a healthy pace in the months ahead. 

Openings jumped to a 14-year high, the Labour Department reported, providing another sign that the winter slowdown is giving way to a spring revival. "This is more confirmation that the economy is indeed emerging from that soft patch in the first quarter and can still pick up even faster in the next few months," advised the chief financial economist at MUFG Union Bank in New York.

Today’s numbers on retail spending for May will test that theory. Econoday.com’s consensus forecast for a 1.3% increase will more than suffice. If accurate, the rise will mark the strongest advance in over a year. A disappointing report, by contrast, will renew worries that there’s more to the recent slowdown in consumer spending than a rough winter.

 

US: Initial Jobless Claims (13:30 GMT) New filings for unemployment benefits continue to project a robust labour market. This leading indicator has been trending lower for the better part of the past six years. It’s anyone’s guess if we’ll see a dip below the recent 15-year low of 262,000 before the current cycle ends. Meanwhile, the crowd’s assuming today’s weekly report will deliver another dose of optimism for payrolls and the economic outlook generally.

Claims are expected to tick down by 1,000 to 275,000 (seasonally adjusted) for the week through June 6. That’s effectively no change for this series, which can be volatile in the short run. But a print of 275,000 is close to April’s 15-year low. In that case, the bullish aura surrounding claims will continue to shine brightly over the near-term macro horizon.

“The labour market continues to improve, with low layoffs and strong hiring,” PNC economist Gus Faucher wrote in a note to clients last week. “The tightening labour market will lead to stronger wage growth in 2015 as employers find they need to raise pay to attract workers.”

Almost no-one expects that today’s update will conflict with that rosy outlook.

 

US: Consumer Comfort Index (14:45 GMT) The numbers that precede this weekly release on consumer sentiment will determine if another decline is worrisome. For now, it’s obvious that the mood has soured over the past two months. Bloomberg’s Consumer Comfort Index (CCI) has been sliding for eight straight weeks, falling to a six-month low of 40.5 for the seven days through May 31.

By some accounts, the weakness is a warning sign that the appetite for spending has diminished, and will remain so for the near term. The good news is that this isn’t about a weak labour market. But whatever the reason for CCI’s decline, another dip in today’s update will only heighten concern that there’s trouble brewing for the US economy, which relies on consumer spending for roughly 70% of gross domestic product.

Then again, if today’s retail sales data match expectations and deliver a solid gain for May (see note above), another tumble in CCI will be dismissed. All the more so if jobless claims stick close to a 15-year low, as today’s update is expected to show.

The April retail sales report “clearly indicates that the bounce back in March did not continue into April", the director of consumer economics at IHS Global Insight recently explained. "It is becoming blatantly obvious that the so-called consumer gasoline price dividend is not motivating the average American household to increase their discretionary spending in any meaningful manner.”

Today’s numbers will help the market decide if that’s still a reasonable view.

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 – Edited by Susan McDonald

James Picerno is a macro analyst/editor at CapitalSpectator.com. Follow James or post your comment below to engage with Saxo Bank's social trading platform.