Retail sales gain in June. Retail sales grew for a fifth straight month, rising 0.5% in June to match consensus expectations. Initial figures for May reported last month were revised higher, from 0.8% to 1.3% to mark the largest growth rate since September 2017. Eight of 13 sub-groups within retail sales gained month over month, confirming a broad-based pickup in consumer activity. However, while consistent gains in retail sales show the health of the consumer amid a strengthening economy, control-group prices, which are used to calculate GDP, painted a somewhat less encouraging picture, remaining unchanged month over month at 0.4% (matching consensus expectations). Despite stagnant control-group prices, U.S. consumer demand remains robust as spending continues to accelerate following the first quarter slowdown.
Weekly Economic Commentary: Global growth likely to remain steady despite risks from trade, central banks. Coordinated global growth in 2017 helped produce the best year for overall global growth since 2011. We expect the global economy to grow at a similar 3.8% pace in 2018, with accelerating growth in the U.S. offsetting slower but still solid growth in Japan, Europe, and emerging markets. Trade and the gradual removal of central bank support remain risks, but we believe that supportive fiscal policy, in the U.S. in particular, will more than compensate and help keep the global economy on a steady path.
Weekly Market Commentary: The rally can continue. We expect strong earnings to remain the key driver of stock gains in 2018, thanks in large part to the benefits of the new tax law. Although we do expect volatility to increase, in the context of steady economic growth and strong corporate profits, we see the potential for further stock gains in the second half of 2018. Small caps, value, cyclical, and emerging markets are our favorite areas for potential equity gains the rest of this year.
Week ahead. Looking ahead, a variety of economic data is due out in the U.S. next week, highlighted by the Federal Reserve's Beige Book on Wednesday and followed by the leading economic indicators on Thursday. The foreign docket includes inflation readings out of the Eurozone and Japan, as well as China's second-quarter gross domestic product figures. View all the key events on the Weekly Global Economic & Policy Calendar.
Monitoring the Week Ahead
Monday
Retail Sales MoM (Jun)
Empire Mfg. Report (Jul)
Eurozone: Trade Balance (May)
China: New Loan Growth & Money Supply (Jun)
Tuesday
Industrial Production MoM (Jun)
NAHB Housing Market Index (Jul)
UK: Jobless Claims (Jun)
UK: Unemployment Rate (May)
Wednesday
Fed: Beige Book
UK: CPI & PPI (Jun)
Eurozone: CPI (Jun)
Thursday
Conference Board Leading Index (LEI) MoM
UK: Retail Sales (Jun)
Japan: CPI (Jun)
Friday
Japan: All Industry Activity Index (May)
*Please see our Outlook 2018: Return of the Business Cycle publication for additional descriptions and disclosures.
