US consumer spending & confidence bounces – Deutsche Bank

Research Team at Deutsche Bank, notes that the US total retail spending rose a much stronger than expected 1.3% mom in April, the most in 13 months, boosted by a solid 3.2% mom rebound in auto sales.

Key Quotes

“In addition, both February and March were revised up by 0.1pps. Whilst auto sales led the way, growth was impressively broad-based with only the building materials sector seeing a decline in sales in April. Excluding auto sales spending rose 0.8% mom whilst retail control – the bit that goes into the National Accounts rose 0.9% mom. Compared with a year earlier retail control rose 3.6%, up from 2.7% the prior month. The rebound in spending fits in well with the sturdy household income growth implied by the April employment report, and with the fact that a relatively elevated household savings rate provides scope for greater spending if consumers are feeling confident.

On that note, the University of Michigan’s consumer confidence index for May was the second economic report to print well above market expectations on Friday, with the headline index rising 6.8pts to 95.8. The expectations index rose an even stronger 9.9pts to 87.5, which was the best reading since June last year.

In other news business inventories rose 0.4% mom in March, also beating expectations. Taking all this news on board the Atlanta Fed’s GDPNow estimate of Q2 GDP growth has been revised up 2.8% saar after what is currently looking like a slightly less-weak Q1. Turning to inflation, the final demand PPI rose 0.2% mom in April, boosted by higher fuel prices. The core PPI rose 0.1% mom and was up a weaker than expected 0.9% yoy. Meanwhile the inflation expectations measures in the University of Michigan survey revealed a 0.3pp decline in year-ahead expectations to 2.5%, whereas the 5-year ahead expectation nudged up 0.1pp to 2.6%.”