by Macroview Our forecasts for US GDP growth remain unchanged, and we continue to expect a 25bp rate hike in December, followed by two others in 2017. Core retail sales in the U.S. rose by ‘only’ 0.1% month on month ( m-o-m) in September, below consensus expectations. Moreover, the July number was revised down. The result was that core retail sales were almost flat (+0.3% quarter on quarter (q-o-q) annualised in Q3), much lower than the 6.9% rise seen in Q2. Nevertheless, we continue to believe consumer spending grew by around 2.7% q-o-q annualised in Q3, following a rise of 4.3% in Q2. The fact that consumer spending growth probably softened as the third quarter advanced suggests sluggish momentum as we move into the fourth quarter. However, our forecasts that US GDP will grow by 2.5% q-o-q annualised in Q3 and 2.0% in Q4 remain unchanged, as do our projections for yearly average growth of 1.5% in 2016 and 2.0% in 2017.We remain reasonably optimistic on US consumer-spending growth. Employment growth will probably slow down somewhat over the coming months but should remain relatively healthy, while wage increases are likely to continue to pick up gradually. And although there has been a noticeable fall in the savings rate so far this year, it remains relatively high when compared to the level of consumer confidence and to household wealth trends.
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Our forecasts for US GDP growth remain unchanged, and we continue to expect a 25bp rate hike in December, followed by two others in 2017.
Core retail sales in the U.S. rose by ‘only’ 0.1% month on month ( m-o-m) in September, below consensus expectations. Moreover, the July number was revised down. The result was that core retail sales were almost flat (+0.3% quarter on quarter (q-o-q) annualised in Q3), much lower than the 6.9% rise seen in Q2. Nevertheless, we continue to believe consumer spending grew by around 2.7% q-o-q annualised in Q3, following a rise of 4.3% in Q2. The fact that consumer spending growth probably softened as the third quarter advanced suggests sluggish momentum as we move into the fourth quarter. However, our forecasts that US GDP will grow by 2.5% q-o-q annualised in Q3 and 2.0% in Q4 remain unchanged, as do our projections for yearly average growth of 1.5% in 2016 and 2.0% in 2017.
We remain reasonably optimistic on US consumer-spending growth. Employment growth will probably slow down somewhat over the coming months but should remain relatively healthy, while wage increases are likely to continue to pick up gradually. And although there has been a noticeable fall in the savings rate so far this year, it remains relatively high when compared to the level of consumer confidence and to household wealth trends. All these factors should support personal consumption.
Minutes of the September FOMC meeting released this week contained little additional information. Our scenario for US monetary policy remains unchanged. As the next FOMC meeting will take place less than a week before the US presidential elections and is outside the normal quarterly roster of meetings (no press conference, no revised economic projections or ‘dot plot’), a hike on 2 November seems quite unlikely. We are sticking to our view that the FOMC will raise rates by 25 basis points in December, with two additional 25bp hikes in 2017.