US: Lots of data to digest with retail sales in focus – Nomura

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Feb 12, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    Research Team at Nomura, suggests that we have plenty of economic releases from the US in today’s session but the most important will be the retail sales data.

    Key Quotes

    Retail sales: We expect favorable fundamentals (solid labor market performance, low energy prices, relatively elevated savings rate) to enable consumers to continue to support economic growth, while the industrial sector fights through various challenges. We forecast that we will see some bounce back in core retail sales (excludes auto, gasoline, building material, and food services and drinking places sales) in January, especially in certain categories of sales (e.g., apparel), which may have been weighed down by the unseasonably warm winter weather in December.

    However, we expect the rebound in sales to be gradual, as the data suggest that consumer activity lost some momentum at the end of last year. On balance, we forecast a 0.2% rise in core retail sales. Continued declines in retail gasoline sales in January probably weighed on sales excluding autos, which we expect to fall by 0.2%. Vehicle sales increased modestly in January and should mitigate the decline in total retail sales, which we expect to fall by 0.1%.

    Import prices: Although petroleum prices have weighed on import prices, nonpetroleum import prices have been flat to declining on a monthly basis since April 2014. Crude oil prices fell sharply in January and the dollar appreciated during the month. Both movements should put further downward pressure on import prices. As a result, Consensus forecasts a 1.5% decline in import prices for January. Low import prices of consumer goods should continue to weigh on domestic retail prices of consumer goods in the near term.

    Business inventories: Inventories at manufacturers rose by 0.2% in December and Consensus forecasts that wholesale inventories fell by 0.2%. Based on these inputs and expectations for retail inventories—the other missing piece—Consensus expects total business inventories to have increased by 0.1% in December. As the inventory-sales ratio has been elevated over the past year, we expect inventory investment to continue to drag on growth in the near term.

    University of Michigan consumer sentiment: This consumer sentiment index declined for the first time in four months in January, as the sharp drop in equity prices in the second half of the month appeared to weigh on confidence. Consensus expects the preliminary reading of the index in February to increase slightly, by 0.8 point to 92.8. Any sharp drops in sentiment could place downside risk on consumer activity early in 2016.

    The 5- to 10-year-ahead inflation expectations, a relevant measure for monetary policy, inched higher to 2.7% from 2.6% in January, which could give some FOMC participants more confidence that inflation expectations remained well anchored, albeit at the low end of the recent range. Given the importance of survey-based measures of long-term inflation expectations for policy, this will be worth watching.”
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