Excluding cars, retail sales increased by 0.6% month on month, exceeding expectations
Industrial output increased by 1.1% month on month, significantly higher than the consensus expectation of the market
Retail and output data show that the momentum of US economic growth is stable
New highlights: on May 17, the data released by the U.S. Census Bureau showed that the U.S. retail sales / retail sales (excluding cars) / retail sales (excluding cars and gasoline) increased by 0.9% / 0.6% / 1.0% month on month in April, slightly lower / exceeding / exceeding expectations (market consensus expectation: 1.0% / 0.4% / 0.7%; March: revised up from 0.5% / 1.1% / 0.2% to 1.4% / 2.1% / 1.2%). This is the fourth consecutive month of positive growth in retail sales. On the same day, the data released by the Federal Reserve showed that the US industrial output / manufacturing output increased by 1.1% / 0.8% month on month in April, higher than the forecast (market consensus expectation: 0.5% / 0.4%; March: 0.9% / 0.8%). The capacity utilization rate was 79.0%, higher than the market expectation (market consensus expectation: 78.6%; March: 78.2%). This is also the fourth consecutive month of positive growth in industrial output.
Despite record inflation, retail sales recorded broad and strong growth. U.S. consumers’ spending on cars and parts (2.2%), furniture (0.7%), electronic products and appliances (1.0%), health and personal care (0.7%), clothing and clothing accessories (0.8%) increased compared with the previous month. At the same time, it also increased spending on food services and beverage stores (2.0%), indicating that consumers continue to shift from commodity consumption to service consumption as the Omicron epidemic subsides and people want more personal consumption experience. Meanwhile, gas station expenditure fell by 2.7% month on month, mainly due to a slight decline in April after a brief rise in gasoline retail prices after the Russian Ukrainian war in March.
Steady consumer and enterprise demand led to steady growth of industrial output. Among the manufacturing output, the output of durable goods and non durable goods manufacturing increased by 1.1% and 0.3% month on month respectively (March: 0.9% and 0.8%). The output of automobiles and parts grew strongly for the second consecutive month, with a month on month growth rate of 3.9% (March: 8.3%). Mining and utility output rose 1.6% and 2.4% month on month, respectively (March: 1.9% and – 0.3%). The increase in utility output reflected a 2.1% (March: 1.3%) increase in electricity output and a 4.4% (March: – 9.0%) increase in natural gas output. Industrial output in April was 4.2% higher than that before the epidemic (February 2020).
Our point of view. Looking ahead, personal consumption expenditure will continue to grow steadily, benefiting from the tight labor market, steady wage growth and the savings accumulated by the government’s early implementation of fiscal stimulus policies. However, high inflation is eroding people’s purchasing power, and the average hourly wage growth is still lower than that of consumer prices. In addition, it is expected that the Federal Reserve will further tighten monetary policy, which may lead to a gradual slowdown in the growth of personal consumption expenditure with the end of the year. Strong demand from consumers and businesses will continue to support industrial output growth. Investors are worried about whether the Fed can achieve a “soft landing”, that is, cooling inflation without triggering a recession. At present, we believe that the probability of recession in the near future is still low. Historically, the time interval between the upside down of the US bond yield curve and the economic recession ranges from 5 to 23 months (see our strategy report “the impact of the upside down of the US bond yield curve on the offshore market” released on April 25, 2022).
