The Week Ahead for the U.S. Economy/Markets (15 April 2018)

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Here’s our view on this week’s U.S. related data releases.

The most important economic data releases for the week commencing 16 April 2018:


- Retail Sales (consensus exp. 0.3%)


- Housing Starts (consensus exp. 1.271M)

- Building Permits (consensus exp. 1.320M, 11.9% change)

- Industrial Production (consensus exp. 0.3%)

- Capacity Utilization (consensus exp. 77.9%)


- Philadelphia Fed Manufacturing Survey (consensus exp. 20.9)


In terms of the economic data, our focus this week will be on the retail sales release. The consensus expectation is for it to be a positive reading with an increase of 0.3%. Although we believe this may be the case, we feel there is a lot more chance of a negative miss (below 0.3%) than for it to come in above.

In recent months, retail sales have been in a slight downtrend, ever since the strong reading in September last year. However, this downtrend is not extreme, as the last three months have seen readings of -0.1%.

The March Non-Farm Payroll figure came in below expectations at 103k (versus the expectation of 193k), this was much below the February reading of 313k, although wages were up by 2.7%. Jobless claims are also looking like they are beginning to tick up, with the current readings being among the highest levels since the year began. Although, the jobless claims numbers are still below the 300k mark that typically shows a healthy labour market. The U.S. is clearly showing a strong jobs market, but there may be signs that this may start to decline if the market is coming close to full employment.

Consumer confidence shows a decline in March, with the reading now at 127.7, down from 130 (which was a very strong reading) in February. Since this ‘soft’ data was increasing until March, while the ‘hard’ data such as retail sales and personal consumption was slightly negative and mixed (respectively), there has been a divergence taking place. The expectation is usually that the hard and soft data will converge through a reduction in the soft data, which we may be seeing take place.

We should also consider that rates have seen an increase and the stock market has declined sharply in March. These factors could weigh on consumers, as well as the current inflation readings.

Overall, based on the above we would expect the retail sales data to come in below or at the consensus expectations but not above.


Our view of the industrial sentiment in the U.S. gives us no real conviction in disagreeing with the consensus view in terms of industrial production, capacity utilization or manufacturing data (such as the Philadelphia Fed Manufacturing Survey).

From a fiscal and political point of view, there are a lot of uncertainties which may weigh on industrial sentiment, including the current trade tariff saga. However, it may be too soon to start seeing signs of that in economic data. In any case, this month’s readings will be interesting benchmarks for what may unfold in the coming months. With that being said, it is also important to note that global demand has been strong and import and export data has been high recently.


We have no reason to disagree with the consensus view for housing starts and building permits. We have seen strong demand in housing recently, with limitations in supply. This obviously warrants increases in prices, as well as increases in construction.

However, we would draw upon similar factors that we mentioned in the ‘Retail’ section as reasons why we may begin to see a reduction begin to take place in the coming quarters.


There are a number of speeches taking place this week by members of the Federal Reserve. Although these are not as significant as other key months, they will still be worth paying attention to, with a particular focus on any hints regarding the rate schedule for 2018 and 2019.

This month, former Federal Reserve chair, Janet Yellen, made her first paid appearance since stepping down. She considered inflation to be in check and unlikely to spike, meaning that rates could stay relatively low.

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