3 Numbers: Softer growth for US consumer spending
- 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
arguing that all’s well for the US macro trend. Photo: iStock
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 Econoday.com’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.
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. Econoday.com’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.
“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. Econoday.com’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.
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.