Here’s our view on this week’s data releases relating to the U.S. economy.
The most important economic data releases for the week commencing 08 July 2018:
- Consumer Credit Change (consensus exp. $11.5B)
- PPI (Consensus exp. 0.1%)
- CPI (Consensus exp. 0.2%)
- Fed Monetary Policy Report
Eyes are on the Federal Reserve, with the prospect of another two rate hikes before the end of this year. This is due to continued strong growth in the economy, labour markets and with inflation near target.
The tariff war between the US and China has now officially started, with the expectation that more expensive imports will lead to higher inflation, therefore bolstering the Fed’s outlook for more aggressive rate hikes.
Market sentiment is high with businesses expecting the economy to continue growing for the next six months.
The confidence in federal policy continues to grow, but uncertainty from the tariff situation has led to subdued investor sentiment with S&P increasing a mere 1.1% so far in 2018.
Consumer/retail sentiment continues to rise, since people expect wages to start increasing as the labour markets tighten. As a result, consumer spending has continued to grow along with consumer credit. This may create headwinds as the cost of finance is beginning to rise from a decade of record lows.
Industrial sentiment is strong following the recent tax cuts, however businesses are becoming more concerned following a tightening of the labour market. There are issues with finding skilled labour, which is quickly becoming the number one concern.
The recent tariffs on steel and aluminium have caused an acceleration in input prices. If prolonged, they will start to cut into corporate profit. Uncertainty around the trade war is causing concern for many businesses.