Ole Hansen
The Russian and Saudi energy ministers met ahead of Opec’s late-November deal, but Saxo Bank head of commodity strategy Ole Hansen says the future for oil remains cloudy.
Article / 29 June 2016 at 5:00 GMT

3 Numbers: Softer growth for US consumer spending

editor/analyst /
United States
  • Gfk’s Consumer Climate Index for Germany on track to hold steady 
  • Softer growth rate for US consumer spending expected in May 
  • Mild pullback in the US Pending Home Sales Index projected for May

By James Picerno

Wednesday’s a moderately busy day for economic news, although ongoing turbulence and debate about Brexit still hangs over the macro outlook for the UK, Europe and perhaps the global economy. Meanwhile, we’ll see a new profile of consumer sentiment in Germany via today’s update of the Gfk Consumer Climate Index. 

Later, two US numbers for May will be closely read for fresh insight on the economic outlook: personal income and spending and pending sales data for residential housing.

Cooling down? Today’s report on consumption looks set to offer limited support for
arguing that all’s well for the US macro trend. Photo: iStock

Germany: Gfk Consumer Climate (0600 GMT) What’s the reaction in Germany to last week’s shocking Brexit vote? Officially, the leadership of Europe's economic base promises (threatens?) to offer no special deal to allow the UK to retain unfettered access to the single market while limiting migration. 

“We will make sure that negotiations will not be carried out as a cherry-picking exercise,” Angela Merkel, the German chancellor, said yesterday. "There must be and there will be a palpable difference between those countries who want to be members of the European family and those who don’t."

It’s unclear what this means, or doesn’t, in practice for a simple reason: no one’s sure how quickly the UK will officially disconnect from the European Union. Among the various challenges ahead that will keep everyone guessing: renegotiating 80,000 pages of regulations that have evolved over decades between Britain and the EU.

Meanwhile, how is the consumer sector in the Eurozone's largest economy reacting to the Brexit shockwave? A clear answer will have to wait until survey data for July and beyond arrive. As for today’s update of Gfk’s polling, no change is expected, according to’s consensus forecast. The Consumer Climate Index is on track to hold steady at 9.8 for what’s billed as the expected reading for July – unchanged from last month’s report. Taken at face value, a 9.8 reading suggests that the recent rebound in consumer attitudes is stable, which implies that the outlook for moderate growth remains intact.

But given how much has changed in the last several days, it’s likely that sentiment in Germany – and Europe – will be affected in the weeks ahead, perhaps dramatically, even if today’s Gfk release suggests otherwise.

US: Personal Income & Spending (1230 GMT) Yesterday’s revised data for first-quarter GDP revealed that economic growth was modestly stronger in the first three months of this year. Output rose 1.1% in Q1 (seasonally adjusted annual rate), which is slightly firmer vs. the previous 0.8% estimate. Despite the uptick, the revision doesn’t change the fact that growth has slowed considerably. What’s more, the main source of the slowdown – lower consumer spending – is still front and centre in the new Q1 GDP report.

Personal consumption expenditures decelerated to a 1.5% pace in the current profile – the weakest gain in two years. Today’s monthly report for May will be widely read for clues on what to expect in the Q2 GDP report, which is scheduled for release at the end of July.

The main event in today’s update: the crowd’s looking for a sharp decline in the rate of PCE growth.’s consensus forecast sees spending backtracking to a 0.3% gain. That follows an unusually strong April and so a degree of payback in May isn’t unexpected. But the forecast translates into a lower year-over-year gain of 3.5%, which matches March’s pace for the slowest annual increase for PCE so far this year.

Note that the forecast for a weaker year-over-year rise in May aligns with the downshift in the previously reported retail sales data, which posted a softer annual increase through last month.

News that consumer spending growth has slowed will resonate in the markets, given the ongoing news about the UK's decision to leave the EU. With Brexit fears still swirling about, along with uncertainty about the strength of the US economy in the wake of a weak employment report for May, today’s report on consumption looks set to offer limited support for arguing that all’s well for the US macro trend.

US: Pending Home Sales Index (1400 GMT) Existing home sales climbed to a nine-year high in May, boosting confidence that the housing recovery remained robust.

“This spring's sustained period of ultra-low mortgage rates has certainly been a worthy incentive to buy a home,” said the chief economist at the National Association of Realtors, the group that publishes the sales data. “But the primary driver in the increase in sales is more homeowners realising the equity they've accumulated in recent years and finally deciding to trade-up or downsize.”

Last week’s upbeat report will be supplemented with today’s pending sales data for last month. The numbers are widely read for clues on what to expect for existing sales.
The crowd’s looking for a bit of cooling in the pending figures.’s consensus forecast sees the index dipping 1.0%. But the softer outlook follows three straight monthly increases, including April’s 5.1% surge. Given recent history, a mild retreat doesn’t look worrisome.
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– Edited by Gayle Bryant

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


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