The Day at a Glance | November 16 2022

The Top

*Retail sales in the US over expectations.

*NATO members hold emergency meetings after missiles impact Poland; a Russian attack is ruled out.

*US household debt has grown at a faster pace since 2008 during Q3 ’22 (8.3% annually).

*Janet Yellen met the People’s Bank of China Governor to discuss the world economy.

*UK inflation continues accelerating and reaches 11.1% annually.

*Trump announced his 2024 US presidential bid.

*US industrial production data for October will be disclosed today (0.2%e monthly).

Economic environment

Resilient consumption. Retail sales in the United States registered a higher-than-estimated increase during October (1.3% m/m vs 1.0%e), a sign that consumption remains firm in the world’s largest economy. This is the most significant monthly increase in 8 months; at an annual rate, sales grew 8.37%. Excluding the more volatile composites, the upside surprise was even better than for the general index because sales advanced 0.9% monthly against the 0.2% expected by the analysts. The “Control Group”, used to measure the consumption and the GDP calculations, advanced 0.7% (vs 0.3%e). The upside surprise contrasts with the expectations of weaker consumption derived from interest rate hikes and inflation. However, US consumer has kept a strong consumption pace, financed mainly by credit cards. The use of credit cards among US households registered a 15% annual increase in Q3 ’22, its highest increase in 20 years. Retail sales data creates a dilemma for the FED, which seeks to slow aggregate demand to contain inflationary pressures. The upside surprise indicates that FED Is not curbing private consumption and could increase the rates to a higher level than expected. Markets are negatively reacting to the data (stock markets going down; money markets going up) because the numbers challenge their expectation of a breakpoint in FED. Nevertheless, due to the retail sales figures not being inflation adjusted, some people consider that the data reflects mainly higher prices because sales volumes are lowering in various categories.