Week in Review: US Retail Sales Bounce Back

For the week ending 13 October 2017

  • US retail sales improve, CPI boosted by gasoline
  • IMF nudges up global growth forecast
  • Brexit talks at apparent impasse
  • FOMC on course for December rate hike

Global equities reached new peaks this week as US interest rates pulled back from recent highs. The 10-year US Treasury note receded to 2.28% from 2.38% a week ago. Oil recouped some recent loses, rising to $51.50 per barrel from $49.50 last Friday. Equity volatility remains muted, trading at 9.85, little changed from last week's reading of 9.50.


US retail sales rebound in September
After dipping 0.2% in August, US retail sales rebounded strongly in September, rising 1.6%. Higher gasoline prices in the wake of Hurricane Harvey and a jump in auto sales were major contributors. Higher gas prices also contributed to a 0.5% advance in the Consumer Price Index in September. Stripping out food and energy, prices rose a muted 0.1% last month.

IMF kicks off fall meeting with growth upgrade
As finance ministers and central bankers gather in Washington this week for the fall meetings of the International Monetary Fund (IMF) and World Bank, IMF economists released their latest World Economic Outlook. The fund’s growth forecast was slightly more upbeat, with global gross domestic product expected to expand 3.6% this year and 3.7% in 2018, a 0.1% increase from the last update in July. IMF chief economist Maurice Obstfeld called the current global acceleration notable because it is more broad-based than at any time since the start of this decade. This year runs counter to many recent years when economists were forced to trim overly optimistic forecasts rather than raise them.

Juncker: Pay first, talk later
European Commission president Jean-Claude Juncker said on Friday that the United Kingdom would need to pay its “divorce bill” before discussions can proceed on trade and future relations between the UK and the European Union. The EC leader said that negotiations have advanced more slowly than expected and that it is unlikely the European Council will agree when it meets next week that sufficient progress has taken place for negotiations on the future relationship to begin. Earlier in the week EU chief Brexit negotiator Michel Barnier said discussions on the financial settlement were deadlocked.

Fed signals December rate hike likely
Minutes from the September meeting of the US Federal Reserve's Federal Open Market Committee show that “many” members thought another rate hike was likely to be warranted late this year if the economic outlook remains roughly unchanged. However, some members expressed concerns that recent soft inflation data may not be temporary, owing to idiosyncratic factors, as the committee has stated in the recent past. Falling prices for things such as mobile phone service and prescription drugs have temporarily suppressed inflation, according to the Fed.

Trump takes executive action on health care
With efforts to repeal and replace the Affordable Care Act stymied in Congress, US president Trump this week issued an executive order to reform the health care sector. The order allows employers to band together to form groups, potentially lowering the cost of coverage. It also allows insurers to offer coverage across state lines. In addition, the administration is expected to announce later today that it will halt payments to insurers to offset government subsidies for low-income purchasers. Insurance carriers have been raising premiums in recent months in anticipation that the payments would be halted.

ECB setting stage for next policy phase
The European Central Bank appears to have floated several trial balloons in the press this week as it moves toward shifting its exceptionally easy stance toward monetary policy before the end of the year. One proposal reportedly being considered by the ECB is to cut in half the rate at which it buys European bonds, from €60 billion to €30 billion beginning in January, and keeping the program active for at least nine months. At the same time, ECB president Mario Draghi said in Washington that policy rates will not be raised until well past the end of quantitative easing. Markets appear to be focusing on the policy rate forecast more than the QE rumors, with 10-year German bund yields falling 4 basis points on Friday to 0.41%.





Sun, 15 Oct

United States

Yellen speech at G30 International Banking Seminar

Mon, 16 Oct


Consumer Price Index

Mon, 16 Oct


Industrial production

Tue, 17 Oct

United Kingdom

Consumer Price Index

Tue, 17 Oct


Consumer Price Index

Tue, 17 Oct


Industrial production

Wed, 18 Oct

US Fed's Beige Book

 Thu, 19 Oct

China GDP, retail sales, industrial production

 Thu, 19 Oct

UK Retail sales

 Fri, 20 Oct

US Existing home sales

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Sources: MFS research; The Wall Street Journal; The Wall Street Journal Online; Bloomberg News; Financial Times; Forbes.com; CNNMoney.com; NBCNews.com.

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