Retail Sales Show U.S. Firms as China Cools: Global Economy

Americans flocked to car dealerships and shopping malls in March, generating the biggest gain in retail sales in more than a year, economists forecast a report to show.

The figures on April 14 kick off a week of U.S. economic data -- including housing starts and industrial production -- that are projected to show the world’s largest economy strengthening after a weather-depressed start to 2014.

Economies in Canada and the U.K. are also making progress. In Canada, the central bank on April 16 is projected to keep its benchmark interest rate unchanged and update its economic forecast amid signs the recovery is picking up. The same day, figures will probably show the jobless rate in the U.K. dropped.

In Asia, data will probably show the economies in China and Singapore cooled in the first quarter, while in Brazil, consumer prices probably climbed by the most in more than a year.

U.S. RETAIL SALES

-- Sales at U.S. retailers jumped 0.9 percent in March, the biggest gain since September 2012, according to the median projection of economists surveyed by Bloomberg. Cars and light trucks sold last month at a 16.3 million annual pace, the highest since May 2007, according to industry figures. Purchases excluding auto dealers increased 0.5 percent, the most since July and a sign the pickup in demand is broad-based, according to the survey.

-- “We also expect a rebound for growth in building materials and food services spending as the weather improves,” economists at Bank of America led by Ethan Harris, who project a 0.9 percent gain in retail sales, wrote in a research note. “After recent weakness in spending, we believe there is pent-up demand. That said, we think there is a risk that such demand will be slow to show up in the data” because consumers need to build up savings, they said.

-- “With the late timing of the Easter holiday this year as well as the late break in the winter weather, there’s a good probability that the traditional ‘core’ areas of spring sales (e.g. apparel) get pushed forward into April,” Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC, wrote in a note. “Looking beyond the one-month data, we see decent potential for continued growth in retail sales supported by a much cleaner consumer balance sheet situation and stable job growth.”

BANK OF CANADA

-- Bank of Canada Governor Stephen Poloz on April 16 will keep his central bank’s benchmark interest rate at 1 percent, according to economists surveyed by Bloomberg. The central bank will update its economic forecast after recent figures showed the recovery is gaining traction. Poloz, who has said the bank is neutral on the direction of policy, will also hold a press conference.

-- “We are cautious about whether the data will translate into significant changes to the growth forecast,” said Mark Chandler, head of fixed-income strategy at Royal Bank of Canada’s RBC Capital Markets unit in Toronto. Poloz may instead suggest that “downside risks to inflation have lessened somewhat,” he said.

U.K. LABOR MARKET

-- The U.K. jobless rate, measured by International Labour Organization methods, is projected to fall to 7.1 percent in the three months through February, matching November as the lowest since 2009, from 7.2 percent in January, according to the median estimate in a Bloomberg survey before the April 16 report from the Office for National Statistics. The Bank of England’s Monetary Policy Committee has agreed that upon reaching its unemployment threshold of 7 percent, it will turn its focus to a larger array of measures in determining when to raise interest rates.

-- The BOE’s shift means the central bank “is now looking at the slack in the economy in a more holistic way and seems more comfortable communicating its assessment of the appropriate policy stance by using a range of variables, not just the labour market,” Blerina Uruci, an economist in London for Barclays Plc, said in an April 10 report. “Low inflation will support its message that there is no pressure to start tightening policy imminently and that there is scope to continue supporting the recovery.”

CHINESE GROWTH

-- China’s economy probably grew 7.3 percent in the first quarter from a year earlier, the weakest performance since the same three months in 2009, after a 7.7 percent rate of expansion in the previous period, according to the median estimate of economists in a Bloomberg survey before data on April 16. Two Chinese manufacturing gauges released on April 1 pointed to weakness in the economy last month, with a Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics falling to the lowest level since July. China outlined a package of measures including railway spending and tax relief to bolster the economy and create jobs after a slowdown endangered Premier Li Keqiang’s target of 7.5 percent growth this year.

-- “China’s economy will probably see a further slowdown in coming quarters, as policy makers try to strike the right balance between structural reform and supporting short-term growth,” economists at London-based Capital Economics Ltd. wrote in a report. “But a hard landing remains unlikely.”

SINGAPORE GDP

-- Singapore’s gross domestic product growth probably slowed to a 0.4 percent annualized rate in the first quarter after increasing 6.1 percent in the previous three months. While escalating living costs and rising wages present an inflation risk, the Monetary Authority of Singapore will probably continue to let the Singapore dollar stay on a “modest and gradual” appreciation path as it looks to support growth, according to all 23 analysts surveyed by Bloomberg. The central bank uses the exchange rate rather than borrowing costs as its main policy tool. The GDP figures and the MAS decision are due April 14.

-- “The MAS is expected to continue its exchange rate policy stance of a gradual appreciation,” economists at DBS Group Holdings Ltd. including Singapore-based Irvin Seah wrote in a note. A “possible spike up in inflation due to wage pressure as well as a fairly healthy pace of economic growth essentially call for a continued tightening bias in the monetary policy,” he said.

BRAZIL INFLATION

-- Brazil’s statistics institute on April 17 probably will report that consumer prices rose 0.85 percent in mid-April, the biggest gain since January 2013. At the same time, policy makers signaled they may pause after raising interest rates nonstop for a year. Central bank President Alexandre Tombini told reporters on April 10 that inflation will ease in coming months as the shock of food-price increases passes.

-- “There are things going on that show not a very good dynamic for inflation at all,” said John Welch, a macro strategist at Canadian Imperial Bank of Commerce. “Food prices shot up in March, and they’ve continued to shoot up. You’ve also had electricity price increases in a number of states.”

To contact the reporter on this story: Vince Golle in Washington at vgolle@bloomberg.net

To contact the editors responsible for this story: Carlos Torres at ctorres2@bloomberg.net Mark Rohner

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