U.S. Retail Sales Strengthen
Total retail sales increased 0.8% (5.9% y/y) during May following a 0.4% April gain, revised from 0.3%. It was the strongest monthly increase since November. A 0.4% rise had been expected in the Action Economics Forecast Survey. Excluding motor vehicles and parts, retail sales rose 0.9% (6.4% y/y) after a 0.4% increase, revised from 0.3%. It also was the firmest gain in six months. A 0.5% rise had been expected. (…)
Non-auto less gasoline sales are booming. They are up 5.1% YoY but are up 6.6% annualized in the last 3 months and the gains are widespread. The Commerce Dept. estimates that real retail sales have increased at a 6.3% annualized rate in the last 3 months.
With that kind of demand, the Fed, and just about everybody, could have big surprises in coming months. Also, this won’t help the U.S. trade deficit.
Retail sales were strong in May, rising 0.8% from a month earlier, the Commerce Department reported Thursday.(…) True, a 2% increase in gasoline-station sales—a consequence of higher fuel prices—were part of the sales strength. But exclude gasoline stations and sales were still up a robust 0.7%.
One thing that did stick out in the report, however, was a 2.4% gain in sales at building material and garden equipment and supplies dealers. The big home improvement chains have said higher lumber prices, which hit record levels last month, have helped boost sales
The U.S. relies heavily on imported lumber, particularly from Canada, and the tariffs of around 20% that the White House levied on Canadian lumber last year haven’t changed that dynamic. So buyers have had to pay up. On Wednesday, the Labor Department reported that wholesale prices for softwood lumber rose 6.4% in May from April, and Thursday it reported that imported lumber prices rose 6%. (…)
(…) In January, Trump announced steep worldwide tariffs on washers (and solar panels, which got a lot more attention). (…)
(…) Those metal tariffs have left steel prices more than 50 percent higher in the United States than they are in China or Europe. This is bad news for U.S. companies that purchase steel — including to manufacture washing machines, which are essentially big steel boxes.
Perhaps worse, our furious trading partners are now striking back by placing new tariffs on U.S. goods. Among the products that both the European Union and Canada have targeted for retaliation?
You guessed it: U.S.-made washing machines.
Ohio factory workers thought they’d be big winners from Trump’s unorthodox trade approach. But when all’s said and done, it could be, at best, a wash.
Canadians Are Starting to Ease Up on Their Household Debt Binge
Canada’s debt to disposable income ratio declined by the most on record in the first quarter, boosting confidence the country’s households can handle higher borrowing costs.
The ratio fell to 168 percent in the first three months of 2018, from 169.7 percent in the prior period, Statistics Canada said Thursday in Ottawa. The 1.7 percentage point decline was the most in data back to 1990, and follows an almost continual run of increases to a record 170 percent in the third quarter of 2017.
Credit-market debt rose just 0.3 percent January to March, reflecting the lowest volume of mortgage borrowing in almost four years. Disposable income increased 1.3 percent. Meanwhile, a separate Statistics Canada report showed the country’s new housing price index was flat in April, and Toronto prices posted the first 12-month decline since 2009. (…)
U.S. Gives Green Light to Tariffs on Chinese Goods President Trump approved tariffs on about $50 billion of Chinese goods as the U.S. ratchets up its trade fight with Beijing
(…) It wasn’t clear when the tariffs would go into effect. Beijing has said that it intends to assess tariffs on a corresponding amount of U.S. goods. (…) The affected imports would face 25% tariffs (…)
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Mexico studying billions in retaliatory tariffs on U.S. corn, soy imports
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Nafta Talks Will Extend Into Summer, Canadian Official Says
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Trump’s Tariff Threats Are Paralyzing American Business
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The topsy-turvy logic of Trump’s trade tirades Despite what the president says, tariffs between rich countries are low
(…) American tariffs are indeed low — the World Trade Organisation estimates that its weighted average tariff rate is 2.4 per cent. But at 3.1 per cent, average Canadian tariffs are only slightly higher, as are those of the EU (and therefore France, Germany, Italy and the UK). Japan’s tariffs are lower than the US. (…)
ECB to End Bond-Buying Program in December The European Central Bank is closing a chapter on one controversial policy, government bond purchases, while extending the life of another: negative interest rates.
The European Central Bank announced the end of its €2.5 trillion ($2.9 trillion) bond-purchase program Thursday, but investors reacted as if stimulus had just been extended.
Stocks rallied and the euro sank because just as the ECB declared an end to the so-called quantitative easing, it also pledged that interest rates would remain unchanged at least until summer of next year. That was the first time the ECB had made such a clear commitment, and it was the announcement investors were most interested in. (…)
Smart move given that the ECB has already bought most of what’s out there and it wants to keep the euro from rising.
Bank of Japan Bucks Global Trend of Monetary Tightening The Bank of Japan stuck to its ultra-easy monetary policy, resisting the global trend in large part because inflation in Japan isn’t getting close to the central bank’s 2% target.
IMF Sees U.S. Potential Growth at Half the Pace of White House Estimates
The International Monetary Fund warned that the economic boost from last year’s tax cuts in the U.S. will fade in 2019 and 2020, and the U.S. economy will then slow considerably.
The IMF’s forecasts, released Thursday in Washington as part of its annual review of the U.S. economy, provide a sharp contrast to the economic outlook of the White House, which sees growth accelerating to a sustained 3% annual growth rate within five years. The IMF sees the U.S. growing at about half that pace once the tax cuts’ impact fades. (…)
The growth will drop as low as 1.4% in 2023, the IMF said, a more pessimistic outlook than that of the Federal Reserve, which released forecasts Wednesday calling for 1.8% growth in the longer run, and the Congressional Budget Office, which foresees 1.6% growth by 2023.
In each case, the forecasts aren’t an estimate of exactly what the economy will look like so many years out; rather they are estimates of the economy’s underlying potential. In recent decades, such forecasts have often missed the mark, generally by being too optimistic. (…)
(…) That is a premium of nearly 20% to Disney’s all-stock offer for the same set of assets. (…)