Weekly Market Recap

Big spender

22/11/2021

Week in review

U.S. retail sales strong at 1.7% m/m for October
Australian wages grow by 2.2% y/y in 3Q
U.K. inflation jumps to 4.2% y/y in October

Week ahead

Eurozone and U.S. PMI for manufacturing
RBNZ official cash rate
Australia retail sales for October

Thought of the week

Worries that rising prices would harm consumer spending habits in the U.S. were soothed last week. However, despite the recent decline in consumer sentiment figures, the desire for more stuff appears relentless. The absolute level of retail sales was above the peak from earlier in the year, which was fueled by the government’s so called ‘stimi’ cheques. Retail sales is a value figure so reflects not just an increasing volume of purchases but also the increase in value as prices rise in response to supply shortages. However, even when controlling for things like rising fuel and food prices, spending was still up. The implication is that even as prices rise, individuals are willing to draw down on elevated savings to fund their purchases. Given that household consumption accounts for well over two thirds of the U.S. economy, the turn in spending habits points to a very strong final quarter for the U.S. economy and corporate earnings.

Declining confidence hasn’t harmed spending

U.S. retail sales (billion) and consumer confidence index

Source: FactSet, U.S. Census Burea, University of Michigan, J.P. Morgan Asset Management. Data reflect most recently available as of 18/11/21.
All returns in local currency unless otherwise stated.
Equity price levels and returns: Levels are prices and returns represent total returns for stated period.
Bond yields and returns: Yields are yield to maturity for government bonds and yield to worst for corporate bonds. All returns represent total returns. AusBond Comp is the AusBond Composite 0+ Yr, AusBond IG is the AusBond Credit 0+ Yr both provided by Bloomberg.
Currencies: All cross rates are against the Australian dollar. An appreciation of the foreign currency against the Australian dollar would be positive and a depreciation of the foreign currency against the Australian dollar would be negative.

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