Thursday data roundup: Will tighter consumer purse strings hasten a rate cut?
S&P 500 edges up, Dow ~flat; Nasdaq dips
Cons disc is weakest S&P sector; energy leads gainers
Euro STOXX 600 index rises ~0.7%
Dollar ~flat; gold rises, crude up >1%; bitcoin down >2%
U.S. 10-Year Treasury yield edges down to ~4.24%
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THURSDAY DATA ROUNDUP: WILL TIGHTER CONSUMER PURSE STRINGS HASTEN A RATE CUT?
Economic data arrived in triplicate on Tuesday, offering downward prior-month revisions, evidence of a strained consumer, and a welcome bump up in output from U.S. goods producers.
But the overall picture was one of economic softening, which could prompt data-dependent Powell & Co to start lowering its key interest rate sooner than expected and/or result in more than one cut this year.
Retail sales USRSL=ECI increased by a meager 0.1% last month, weaker than the 0.3% consensus but an improvement over April's downwardly revised -0.2% contraction.
Across the board, April's data was revised significantly lower.
Peeking behind the curtain of the Commerce Department's report, the 2.2% drop in gasoline station receipts and 1.1% decline in home furnishings dampened the 2.8% jump in sporting goods/hobbies and an 0.8% increase in the non-store space, which includes online shopping.
So-called "core" retail, which strips out autos, gasoline, building supplies and food/drink services (and correlates closely with the consumer spending segment of GDP), rose by 0.4% as expected, staging a healthy rebound from April's 0.5% drop.
Year-on-year, which irons out monthly volatility, retail sales grew by 2.27%, nearly half a percentage point lower than the April number.
"Retail spending is showing the strain of elevated interest rates," writes Michael Pearce, deputy chief U.S. economist at Oxford Economics. "A price-related fall in gasoline station sales also weighed on the headline figure."
"Consumer spending is slowing because real incomes growth is moderating and because some consumers are becoming credit constrained amid elevated interest rates and rising credit card utilization," Pearce adds.
Next, data from the Federal Reserve shows U.S. industrial output USIP=ECI jumped by 0.9% in May, triple the rate forecasted by economists polled by Reuters.
It was the strongest reading since last July.
Factory output matched that number.
Capacity utilization, a measure of economic slack, surged by half a percentage point to 78.7%, the metric's tightest reading since November.
"May saw a welcome increase in industrial production, but it was largely driven by higher output of utilities," says Bill Adams, chief economist at Comerica Bank. "The big picture is that the industrial sector has been running cooler over the last year and a half.
"American consumers have shifted their spending priorities toward experiences and away from things, weighing on demand for goods, and high interest rates are restraining business capital spending and demand for construction materials," Adams adds.
And finally, the Commerce Department returns with the good news that the value of merchandise stacked in the store rooms of U.S. businesses USBINV=ECI increased by 0.3%, hitting consensus on the nose.
This is a marked improvement over March's 0.1% decline and bodes well for current-quarter GDP. Private inventories have been a net detractor to GDP for the last two quarters.
(Stephen Culp)
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TUESDAY'S EARLIER LIVE MARKETS POSTS:
WALL STREET INDEXES START OFF SLIGHTLY HIGHER - CLICK HERE
S&P 500 INDEX: HEATING UP JUST AS SUMMER SOLSTICE HITS - CLICK HERE
U.S. ELECTIONS 2024: A NEW WAVE FOR U.S. EQUITIES? - CLICK HERE
MOVE IN FRENCH BANKS "EXCESSIVE" - BARCLAYS - CLICK HERE
CAUTIOUS EQUITY REBOUND CONTINUES - CLICK HERE
EUROPEAN STOCKS POISED TO REBOUND FURTHER - CLICK HERE
ALL ABOUT RATES - CLICK HERE
Retail sales and retail stocks https://reut.rs/4evPECG
Industrial production https://reut.rs/3zfR9V3
Business inventories https://reut.rs/3VJKYl0
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