Article / 14 June 2016 at 5:03 GMT

3 Numbers: US retail spending growth expected to slow in May

editor/analyst /
United States
  • UK consumer inflation is on track to ticker higher in May
  • But the low figure will mean that fears of UK deflation will linger on
  • A solid rebound is projected for Eurozone industrial output for May
  • Economists expect a sharp May slowdown in US retail sales after April’s surge

By James Picerno

The pace of economic news picks up on Tuesday, including the monthly release of UK inflation data. We’ll also see the official report on Eurozone industrial activity for May, followed by the release on US retail sales for last month.

UK: Consumer Price Index (0830 GMT) Everything’s a sideshow for UK macro analysis until the results from next week’s vote on European Union membership are known. Nonetheless, today’s update on consumer inflation is still relevant, if only as a final look at pricing pressures on the eve of the Brexit vote.

 The release of a soft retail figure for May will further undermine confidence in the outlook for the US, which has already been hurt by a shockingly low payrolls release. Photo: iStock

The crowd’s looking for a slightly firmer trend in today’s release.’s consensus forecast sees year-over-year inflation at the headline level ticking up to a 0.4% rate. That’s still too close to zero to banish worries about deflation risk. But if the crowd’s forecast is right, today’s report will be welcome news after April’s softer trend that left headline inflation dipping to a 0.4% annual rate—a two-month low.

The previous numbers raised questions about the recent revival in inflationary pressures after last year’s brief dip into negative terrain. The crowd's looking for a bit of relief in today's figures.

Last week’s estimate of GDP growth via the National Institute of Economic and Social Research offers support for anticipating that inflation will inch higher in May. Britain’s economy expanded 0.5% for the three months through May, NIESR advised. That’s the fastest rate since January. It’s also another reason to expect that we’ll see a slight increase in the inflation data in today’s release.


Eurozone: Industrial Production (0900 GMT) Economists are projecting a strong rebound in industrial output for the euro area countries.’s consensus forecast calls for a 0.8% monthly increase in April. If accurate, production will post its first rise in three months.

The upbeat outlook aligns with previously published production figures for Germany, France and Italy—all posted solid gains in April, according to Eurostat data. Spain’s output slipped, but only by a thin 0.1 percent in monthly terms.

Even if growth rebounds in today’s Eurozone release, survey data for manufacturing suggest that any improvement will be mild. Markit’s purchasing managers’ index (PMI) for the sector reflects slow growth in recent months. The Eurozone Manufacturing PMI eased to 51.5 in May, a three-month low that signals a sluggish expansion.

“Manufacturing in the euro area remained stuck in a state of near-stagnation in May, failing to break out of the slow growth phase that has plagued producers since February,” Markit’s chief economist said last week.

Today’s hard data on industrial activity for April will probably bounce back into positive territory, but the PMI numbers suggest that it's still wise to keep expectations in check.

US: Retail Sales (1230 GMT) Consumer spending picked up sharply in April, but today’s report for May is expected to deliver a softer gain.

Retail sales for last month are on track to rise 0.3% vs. April, according to’s consensus forecast—well down from the 1.3% surge in the previous report. A 0.3% rise is a respectable gain as monthly changes go over the last several years. Let’s assume that the estimate is correct. If so, the year-over-year rate for spending will slide to 2.3%—precariously close to the low end of annual increases in recent history.

A soft year-over-year gain might be easy to dismiss if employment growth was robust. But the May report on payrolls was shockingly weak. In other words, a disappointing report for today’s retail sales data will stoke fears anew that the economy’s still struggling in the second quarter.

The Atlanta Fed’s GDPNow model is currently projecting a 2.5% increase (seasonally adjusted annual rate) in economic activity for Q2. That’s an encouraging rebound from the tepid 0.8% rise in Q1. The question is how the revised GDPNow data fares after today’s update on retail spending.

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– Edited by Robert Ryan

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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