13 July 2001, 17:48 US consumer spending may be entering downturn, no inflation pressure - analyst
WASHINGTON (AFX) - Despite the 0.2 pct increase in June retail
sales, the underlying data may have turned negative and the robust US
consumer spending could be coming to an end, according to Ian Morris,
economist with HSBC Securities in New York.
"Underlying retail sales may have just turned negative, suggesting
that the consumer could be running out of steam," Morris said, noting
that June retail sales data puts Q2 retail sales, excluding gasoline
and auto sales, at a 2.3 pct annualized increase, lower than the
expected 2.4 pct annualized core inflation rate when June data are
released.
And Morris said the second half of the year could be in for a
further downturn in retail sales as more and more people lose their
jobs.
"Despite tax cuts and lower [interest rates], the outlook for
retail sales in the second half of the year is not bright, given that
the unemployment rate is expected to pick up," Morris added.
Morris was more positive on today's 0.4 pct drop in the Producer
Price Index in June, the sharpest decline in the headline PPI since
February 1999.
"There is no inflation pressure in the pipeline whatsoever," Morris
said, adding "there is good inflation news right throughout the whole
report."
He noted that the core rate of inflation, which rose 0.1 pct, was
lower than 0.2 pct increases in April and May, while the PPI core crude
rate has fallen for five consecutive months.
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