US: Strength in consumption looks unsustainable – ABN AMRO

Bill Diviney, senior economist at ABN AMRO, notes that the US Retail sales came in weaker than expected at -0.3% MoM, while ‘core’ retail sales (ex-autos and gasoline) came in at 0.0% (ABN/consensus for both measures: +0.3%).

Key Quotes

“Upward revisions to August sales comfortably offset this weakness, particularly the ex-autos/gas measure, which was revised up to 0.4% from 0.1%. Indeed, retail sales for the full quarter expanded at a robust 6.0% annualised pace, down only modestly from the 7.7% growth registered in Q2. This implies Q3 private consumption growth of 3.0-3.5%, down from 4.7% in Q2.”

“Such growth rates are unsustainable, in our view, particularly given the slowdown in monthly average payrolls gains, which have fallen to +161k in the year to date, down from +223k in 2018.”

“Looking ahead, we continue to expect the knock-on effects of a weaker manufacturing sector to drive a broader slowdown in the US, primarily via lower jobs growth. We expect payrolls growth to slow further over the coming months, with the monthly average perhaps dipping below +100k in 2020.”