Core view
Retail consumption fell month on month, while service consumption remained strong. Retail sales in the United States increased by 0.3% month on month in February, with gasoline consumption as the main contribution. The market is worried that the high oil price will increase the cost of living of residents, thus inhibiting the consumption of other commodities. After excluding gasoline consumption, the growth rate of retail sales in February was still slightly higher than the average level in the same period in recent years. At the same time, due to the strong retail sales data in January, the decline in retail consumption growth in February was also significantly affected by the base effect. Although the oil price is rising and the living cost of residents is rising, the consumption choice of residents has not been significantly changed. On the other hand, due to the mitigation of the Omicron epidemic, American States successively cancelled the "mask order" and other epidemic prevention restrictions in February, and consumers' demand for goods gradually weakened and their demand for services began to increase. Since February, the number of traffic trips has increased significantly, and the passenger flow has basically returned to the level of 90% in the same period before the epidemic. In addition, the recovery of consumption in restaurants and bars was also very strong. Food and beverage services increased by 2.5% month on month in February, the highest level since June 2021. The PMI of Markit service industry in the United States reached a new high in March. The initial value of PMI in March was 58.9, compared with the previous value of 56.5, the highest level since July 2021. The high prosperity of the U.S. service industry is due to the strong demand for services.
Shock 1: the shortage of oil supply may have an impact on consumption. The conflict between Russia and Ukraine continues. At present, Brent oil price has risen to an all-time high, inflation expectations continue to rise, and the shortage of oil supply may lead to a new oil crisis. At present, the oil price continues to remain high, consumers' expectations of the oil crisis gradually rise, and the consumer confidence index decreases. Compared with previous oil crises, although the high oil price brought about by the conflict between Russia and Ukraine has led to the continuous surge of us CPI to an all-time high, US consumer consumption has not fallen sharply. We believe that there are two main reasons to support the current household consumption in the United States: first, the three rounds of fiscal stimulus during the epidemic increased the savings of American residents. With the relaxation of epidemic prevention policies and the increase of social activities, high savings supported the release of consumer demand. Second, the previous tight labor supply made the growth rate of per capita income in the United States continue to rise, offsetting part of the impact of rising prices on consumption. Now, the proportion of personal savings in disposable income has fallen back to the level before the epidemic, and the growth rate of per capita income has begun to show signs of slowing down. If the tight situation of crude oil supply cannot be alleviated, it is expected that household consumption in the United States will weaken.
Impact 2: mortgage interest rates continued to rise, impacting real estate related consumption. Recently, several Fed officials made hawkish speeches, and the market expects the number and range of interest rate increases to increase within the year. As of March 28, the market expects the probability of raising interest rates by 50bp in May to exceed 70%. The possibility of raising interest rates by 250bp in the year is the highest, which means that it is possible to raise interest rates by 50bp in three meetings. With the increase of the expected interest rate increase, the US mortgage interest rate has risen to the highest level since the epidemic. In addition, if the Fed starts to shrink the table, it is expected that the US mortgage interest rate will continue to rise, which will bring huge pressure on housing sales and affect real estate related consumption.
Impact 3: the rebound of the epidemic has an impact on consumption. Covid-19 epidemic in European countries experienced a stable period in January and February, and the epidemic in many countries rebounded in March. At present, the number of newly diagnosed patients in Germany, France, Britain and Italy is still rising. The premature relaxation of epidemic prevention and control measures in European countries was the main reason for the concentrated outbreak of new cases in March. Like Europe, the United States is one of the first regions in the world to relax or cancel epidemic prevention measures. So far, there has been no large-scale surge of new cases in the United States, but the epidemic in the United States usually lags behind Europe by about a month. If the epidemic rebounds, it will have a great impact on service consumption.
Risk tip: the impact of the outbreak of overseas epidemic on the economy is higher than expected, global commodity prices rise again, and extreme climate has an impact on the global supply chain.
