Wednesday’s retail sales data again reinforced fears of a recession in the U.S., as May fell for the first time this year, down 0.3% (forecast +0.2%). High inflation, gasoline prices and borrowing costs hurt spending on non-essential goods when auto sales recorded the biggest decline (-4%), and sales fell at electronics & appliance stores (-1.3%). Sales excluding autos also surprised on the downside, however, rising only 0.5% versus consensus expectations of around 0.8%. Excluding gasoline, sales rose only 0.1%.
Thursday’s housing market data showed that the housing sector was already feeling the impact of Fed tightening and the surge in mortgage rates. Building permits fell 7% in May to their lowest level since last September, while housing starts sank 14.4%, the most significant drop since the onset of the pandemic. Weekly jobless claims were also higher than expected (229,000 versus roughly 210,000).
The economy of the United Kingdom unexpectedly contracted by 0.3% in April, following a 0.1% fall in March and was expected to grow modestly by 0.1%. The unemployment rate rose to 3.8% in the three months to April, the first increase since 2020.
In Europe, Tuesday’s data on economic sentiment in Germany did not surprise, with the ZEW Indicator dropping to -28. Economists are not as sceptical as in previous periods, but risks such as the implications of sanctions against Russia, an unclear metals situation in China and a gradual change in monetary policy remain.