US retail sales in surprise rebound in June; eurozone inflation eases – as it happened

Julia Kollewe

from on 2021-07-16 14:14 (#5M8SQ)

3.13pm BST

Wall Street has recorded modest gains after a surprise rebound in US retail sales, while Europe's main indices are all in the red. The Dow Jones was 0.55% ahead but has just turned negative, while the Nasdaq has gained 0.2% and the S&P 500 is trading 0.21% higher.

A closely watched survey, the University of Michigan's US consumer sentiment index, has weakened to a five-month low in July.

3.10pm BST

Consumer sentiment in the US has weakened to a five-month low, according to this survey.

The University of #Michigan's #Consumer #Sentiment for the US dropped to a five-month low of 80.8 in July 2021, from 85.5 in the previous month and missing market expectations of 86.5, a preliminary estimate showed. #DGCX #FOREX #FUTURES #FXNEWS pic.twitter.com/jS5j47QAs8

3.08pm BST

A closely watched survey, the University of Michigan's US consumer sentiment reading for mid-July, has come in at 80.8, below forecasts of 86.5, and down from a previous reading of 85.5.

Adam Button at Forex Live has summed it up:

*University of Michigan Mid-Jul Sentiment 80.8

*US May Business Inventories +0.5%; Expected +0.5%

2.39pm BST

James Knightley, chief international economist at ING, is pretty bullish. He reckons the 0.6% rise in June retail sales bodes well for the US economy.

Strong June US retail sales suggests no let up in the appetite of consumers to spend on physical things despite the economic re-opening providing a broadening range of options, such as leisure and hospitality. With finances in great shape and incomes continuing to rise the outlook for spending is excellent.

This is an encouraging report that suggests consumer spending momentum remains strong. Moreover, retail sales is typically only" 40-45% of total consumer spending, which in turn is usually around 65-70% of GDP. Clearly it is a very important component of overall economic activity, but with the economy re-opening there are a greater number of options on which to spend money.

2.35pm BST

Over here, shares are still trading sideways. The UK's FTSE 100 index and Germany's Dax are flat after earlier modest rises, while Italy's FTSE MiB is holding on to a 0.2% gain. France's CAC has lost 0.3%.

2.33pm BST

On Wall Street, shares have opened higher, boosted by gains for banks, energy and travel stocks, following the surprise rebound in US retail sales in June.

2.07pm BST

Paul Ashworth, chief US economist at Capital Economics, says while the headline gain in US retail sales was stronger than expected, the revisions to the size of the decline in May take the gloss off that somewhat and, besides, with consumer prices rising by an even bigger 0.9% last month, that still suggests consumption fell in real terms".

He thinks the 2.3% increase in food services is a little disappointing".

Control group sale did rebound by a healthy 1.1% m/m in June, however, which means they still haven't fallen back that much from the stimulus cheque-fuelled high in March.

Looking at the detail, the 2.6% m/m gain in clothing sales and the 3.3% m/m increase in electronics sales both stand out. They could reflect a continuing tailwind from those cheques, although we suspect that higher prices also boosted the nominal dollar sales values.

2.03pm BST

Sales of electronics appliances rose by 3.3% in June, clothes and accessories stores recorded a 2.6% gain, department stores posted 5.9% growth and restaurants and bars enjoyed 2.3% growth.

1.56pm BST

The unexpected rebound in June retail sales was driven by services, as just discussed. Americans spent more on electronics, clothes and dining out. Here's a handy breakdown.

The great consumer spending rotation

US #retail sales modest +0.6% in June
Core sales +1.1%

Elect +3.3%
Gas +2.5%
Rest & bars +2.3%
Merchand +1.9%
Health +1.6%
Online +1.2%
Food +0.6%
Build mat -1.6%
Autos -2%
Furnit. -3.6%

Strong consumer spending ahead driven by services pic.twitter.com/eR9i1dwJjD

Stronger-than-expected US retail sales in June, rising 0.6%m/m vs -0.3% exp. Control group sales also outperforming at 1.1%m/m vs 0.4% exp. pic.twitter.com/B4gml0deFx

1.53pm BST

But Americans are spending more on travel and entertainment, with at least 160 million people in the US fully vaccinated against coronavirus. Retail sales mostly cover goods but also spending in restaurants and bars, while healthcare, education, travel and hotel accommodation make up the remainder of consumer spending.

Economists expect consumer spending, which accounts for more than two-thirds of US economic activity, to have recorded double-digit growth in the second quarter. In the first quater, consumer spending grew at an 11.4% annualised rate. Households saved at least an extra $2.5 trillion during the pandemic when they were unable to go out and spend.

1.45pm BST

Sales at car dealers fell 2% in June. A global shortage of semiconductors has led to a shortage of cars and hampered vehicle sales. Sales of some household appliances have also been affected by the chip shortage.

Citigroup economist Veronica Clark in New York said:

We expect supply issues and dwindling auto inventories to continue to limit auto sales in the coming months.

1.43pm BST

However, May's fall in retail sales was revised lower to 1.7% from 1.3%, the US Commerce Department said.

Excluding automobiles, gasoline, building materials and food services, which tend to be volatile, retail sales climbed 1.1% last month following May's downwardly revised 1.4% decline.

1.33pm BST

NEWSFLASH: US retail sales rose 0.6% in June from May, far better than the 0.4% drop economists had expected.

BREAKING! US Retail Sales rose 0.6% in June, against an expected decline of 0.3%. Ex auto and gas, retail sales rose 1.1%, also significantly better than expected. pic.twitter.com/oLh5gW8LLi

12.53pm BST

Here's some reaction to the eurozone inflation figures. Oxford Economics economist Maddalena Martini has crunched the numbers.

Eurozone final headline inflation was confirmed at 1.9% y/y in June, unchanged from the flash estimate. Vigorous rises in energy prices continued to contribute the most to the increase in the headline figure, adding 1.7 points. Indeed, energy prices were in line with the recent strong trend and posted a 12.6% y/y surge. We see base effects of recovering oil prices continuing to feed into headline inflation, and we expect some further gains in energy prices this quarter before they begin to normalise.

Core inflation was confirmed at 0.9% y/y in June, decreasing from 1.0% y/y in May. Interestingly, hospitality sector prices such as those of bars and restaurants recorded major gains over the month, indicating that businesses have been adjusting their prices in parallel to re-openings. Underlying price pressures may start picking up from recent subdued levels if this trend continues in the coming months.

12.26pm BST

European stock markets are pretty steady while US Treasury yields are hovering near five-month lows ahead of US retail sales figures for June, out in an hour's time. The yield, or interest rate, on the 10-year US Treasury is at 1.324%, still near the five-month low of 1.25 touched last week.

This week, the Federal Reserve chair Jerome Powell reiterated that rising inflation is likely to be temporary and that the American central bank would continue to support the economy. However, US Treasury Secretary Janet Yellen said inflation risks need to be watched very, very carefully" after data on Wednesday showed the biggest jump in consumer prices in 13 years. The annual rate rose to 5.4% in June, the highest since August 2008.

The spread of the more infectious Delta variant is the key emerging threat for the time being, with Covid-19 cases on the rise again at the global level and in most of the G-7 economies.

11.56am BST

As exports jumped, Spain recorded a trade surplus of 140m in May, up 12.6% from a year earlier, according to customs trade data released by the Spanish ministry for trade and tourism.

Exports grew 55.3% year-on-year to 27.2bn, a record high for the month of May. Imports grew at a similar rate, by 55.6%, to 27.1bn.

INFORME COMERCIO EXTERIOR: MAYO 2021. Continua la recuperacion de nuestro sector exteriorhttps://t.co/23C1VYYoyN
Las exportaciones aumentan un 23,5% de enero a mayo
Las exportaciones crecen un 55,3% en mayo, maximo historico para este mes
Se reduce el deficit comercial pic.twitter.com/NMDIyI6ept

11.16am BST

Italy's trade surplus rose slightly to 5.64bn in May from 5.62bn a year earlier, the country's statistics office Istat reported this morning. Exports climbed nearly 42% year-on-yer to 43.6bn. Sales to other EU countries increased 40% and shipments to non-EU countries jumped 44%.

In the first five months of this year, exports were mainly boosted by sales of machinery and equipment, metals and metal products, motor vehicles and electrical appliances.

Italy recorded a trade surplus of 5642 EUR Million in May of 2021. https://t.co/8u40NKzbLg pic.twitter.com/3cyXsYvDiT

11.09am BST

The lowest annual inflation rates in the eurozone were registered in Portugal (-0.6%), Malta (0.2%) and Greece (0.6%). The highest annual rates were recorded in Hungary (5.3%), Poland (4.1%) and Estonia (3.7%). Compared with May, annual inflation fell in 12 countries, remained stable in four and rose in 11.

11.07am BST

Inflation in the eurozone slowed in June after a pick-up earlier in the year, Eurostat confirmed today, while the bloc's trade surplus declined in May due to a fall in exports.

Consumer prices in the 19-nation single-currency bloc rose 1.9% in June year-on-year, slightly less than May's annual rate of 2%, confirming an initial estimate released by the EU's statistics office. Elsewhere, inflation has accelerated considerably, for example in the US where the annual rate hit 5.4% in June, a 13-year high.

10.17am BST

Royal Dutch Shell has joined forces with Scottish Power to develop the world's first large-scale floating offshore windfarms in the north-east of Scotland, writes our energy correspondent Jillian Ambrose.

The energy companies have submitted multiple plans for a string of large floating offshore windfarms to Crown Estate Scotland as part of the property manager's latest leasing round for access to the coastline.

9.59am BST

Independent high street businesses could face a tsunami of closures" after their debt climbed to almost five times the level it was before the Covid-19 pandemic, as shops, hairdressers, bars and restaurants battle to survive, writes our retail correspondent Sarah Butler.

About 150,000 small businesses have racked up 2.3bn in debt, up from 500m before the pandemic, based on government-backed loans and not including rent debt, according to a report from Bill Grimsey, the former boss of Wickes and Iceland, who has backed a series of investigations into the state of the high street.

9.57am BST

Here are our other main stories this morning.

The Bank of England risks becoming addicted to creating money and needs to come clean about how it plans to unwind its 895bn bond-buying programme, the House of Lords has warned, writes our economics editor Larry Elliott.

9.06am BST

Burberry is very confident that its chief designer Riccardo Tisci will stay, according to its chief financial officer, Julie Brown. Chief executive Marco Gobbetti's looming departure has raised fears that Tisci could follow him out the door.

Brown said that Tisci

remains very excited by the opportunity to continue to inspire our customers with his imprint on Burberry's identity, reinforced by the response to his latest collection.

We're very, very confident of Riccardo's position.

8.07am BST

European markets have opened higher, with the UK's FTSE 100 index up 15 points, or 0.2%, at 7,027. Germany's Dax and Spain's Ibex both rose 0.3% while France's CAC pushed 0.5% higher at the open.

8.05am BST

GSK has unveiled ambitious plans in Stevenage where it wants to turn its 92-acre research & development site into one of Europe's largest clusters for biotechnology start-ups and other early-stage life sciences companies, creating up to 5,000 new jobs.

Britain's second-biggest drugmaker is looking to sell 33 acres of land and attract up to 400m investment from a developer to build out the campus, over the next five to 10 years.

The past 18 months has shown the UK life sciences sector at its best and the UK has recently unveiled an ambitious 10-year vision for the UK life sciences sector. Our goal is for Stevenage to emerge as a top destination for medical and scientific research by the end of the decade. We are excited to find a development partner to realise our vision to foster the next generation of world-class scientists and biotechnology firms in Britain.

7.46am BST

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

EU car sales rose 10% in June, and were up 25% in the first half compared with the same period in 2020, according to the European Automobile Manufacturers' Association (ACEA). Sales reached almost 5.4m vehicles - still 1.5m units below the pre-Covid volume recorded over the first six months of 2019.

Japan's economy is likely to improve... as the pandemic's impact gradually subsides due to progress in vaccinations.

But the outlook is highly uncertain as domestic and overseas economies could be swayed by developments regarding the pandemic.

We saw strong growth across our strategic categories, in particular leather goods and outerwear, and exited markdowns in digital and mainline stores. We continued to roll out our new store concept that will transform how customers experience our brand and product in a uniquely British luxury setting.

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