US Retail Sales surprise markets as consumers show strength despite delta fears
Economists expected consumers to cut back their activity as the delta variant continued its tear through the U.S. Persistent supply chain bottlenecks also were expected to hold back spending as in-demand goods were hard to find. The pandemic’s impact did show up in sales at bars and restaurants, which were flat for the month though still 31.9% ahead of where they were a year ago.
However, sales were strong for most areas during the month, when back-to-school shopping generally results in a pickup in activity, especially so this year as schools prepared to welcome back students after a year of remote learning.
In contrast this morning, UK Retail Sales volumes fell by 0.9% in August 2021, following a 2.8% fall in July; however, volumes were up by 0.3% in the three months to August compared with the previous three months, and in August 2021 were 4.6% higher than their pre-coronavirus (COVID-19) pandemic February 2020 levels.
Not just shipping costs, UK energy prices are climbing as well
Record energy prices have forced two fertiliser plants in the north of England to shut down and brought steel plants to a halt, in some of the clearest signs that the energy crunch engulfing Europe could deal a blow to the UK’s economic recovery.
The US fertiliser maker CF Industries has halted production at its plants in Billingham in Teesside and Ince in Cheshire, which employ about 600 workers, because of rocketing gas prices, which have reached successive record highs across Europe in recent weeks.
Goldman Sachs, a major commodity trader, warned soaring prices would mean heavy industries across Europe running the risk of blackouts this winter, particularly if freezing temperatures drag into 2022 across Europe and in Asia.
The day ahead
Eurozone August CPI inflation figures today are expected to confirm earlier ‘flash’ estimates showing an increase to 3.0%, the highest for a decade, while core CPI inflation rose to 1.6%. The ECB continues to expect the rise to be transitory and forecasts headline inflation to fall back below its 2% target next year.
In the US, figures also released earlier this week showed annual CPI inflation remaining elevated at 5.3% in August, also the month-on-month rise was softer than expected. As the chart shows, US consumer inflation expectations have already begun to move higher this year, especially for one year ahead (at 4.6%), but also for 5-10 years ahead (2.9%). An update from the University of Michigan survey will be provided this afternoon. The survey’s headline consumer sentiment index will also be watched closely after falling sharply last month. We look for a partial retracement.