IMF forecast and retail sales data show U.S. economic resilience
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Rumors of the death of U.S. economic buoyancy have been greatly exaggerated. That is the takeaway from key economic headlines Tuesday morning.
Why it matters: In the last several weeks there have been emerging signs of weakness in the U.S. economy. Tuesday brought powerful reminders that — while the cracks are real and the future uncertain — the basic picture remains one of robust economic activity.
Driving the news: The International Monetary Fund's new World Economic Outlook projects the U.S. economy will grow 2.6% this year. That's down a tick from its spring projection, but double the anticipated GDP growth in the next-strongest G7 nation (Canada, at 1.3%).
- Meanwhile, new retail sales data showed American consumers ended the second quarter on a high note.
By the numbers: A big drop in gasoline prices and the auto sector's cyberattack weighed on the headline retail sales figure, which was flat compared with last month. But stripping out gas and vehicle purchases, sales were up a strong 0.8%.
- Retail sales excluding gas, autos and building materials — the control group that calculates part of the consumer spending component of GDP — rose 0.9%, the best in about a year.
What they're saying: "It is clear that the US consumer may be down but not out, at least for now," Raymond James chief economist Eugenio Alemán wrote in a note.
State of play: The IMF report described a global trend of services inflation proving harder to stamp out than seemed likely at the start of the year — resulting in fewer rate cuts from global central banks than had been anticipated.
- "In some advanced economies, especially the United States, progress on disinflation has slowed," chief economist Pierre-Olivier Gourinchas said in a news conference Tuesday morning. "Risks remain broadly balanced, but some downside near-term risks have gained in prominence."
- "First there could be bumps on the disinflation path in advanced economies. This could force central banks including the Federal Reserve to keep borrowing costs higher for even longer. That could put overall growth at risk," Gourinchas said.
Yes, but: Those risks remain somewhat hypothetical in light of benign June inflation readings.
The bottom line: The global economy always faces risks, but for the moment, the U.S. is cruising along, warning signs notwithstanding.
