By: DailyForex.com
Economics, as I have pointed out before, is a cyclical beast. Bull runs when markets rise end followed by Bear runs (if I may) when pessimism and nervousness prevail and markets fall. If markets have got ahead of themselves (overheated) a recession can ensue – as we’ve seen, this can also be triggered by other factors, but recovery will follow and it is typically strong. Whilst the initial recessions of the Global Financial Crisis are long over and the recession in the Eurozone can be attributed to local factors i.e. the European Sovereign debt crisis (which is direct consequence of the Global Financial Crisis anyway), the recovery has been anything but strong.
The latest evidence for the atypical recovery phase from the crisis comes in the shape of underperforming US consumer retail sales. Since 70% of American GDP stems from the domestic market, poorer sales data is a big concern. Analysts had expected to see 0.8% seasonally adjusted rise in retail spending over the May figure when the June data was released, but the actual figure was a lack-lustre 0.4%. However, it is worth noting that retail sales are up by 27.5% from their low point in 2009.
The data itself is patchy. Sales of building supplies fell by 2.2% in June, tending to suggest that the renaissance in construction will be taking a knock, but car sales were up by 2.1%. Purchases of furniture and household goods also rose by 2.4%. This would tend to suggest that consumer confidence was at least somewhat Bullish because such purchases could be deferred if consumers were worried about their future and job security. Some analysts are interpreting the data to suggest that Q3 GDP will miss its target and come in at below the 1% mark; others remain more optimistic. One thing is certain, the US economic recovery is stuttering upwards, but it is progressing in the right direction.