Gains in consumer spending probably continued to drive the U.S. economic expansion at the end of 2013 as sales at non-auto retailers climbed during the holidays. Elsewhere, inflation in the U.K. probably held at a four-year low in December, Brazil’s central bank may slow the pace of monetary tightening, and Australia’s employment growth cooled.
U.S. RETAIL SALES
-- Retail sales excluding car dealerships increased 0.4 percent for a second month, according to the median forecast of economists before the Jan. 14 Commerce Department report. Auto dealers had trouble luring customers into showrooms in part because of inclement weather. Specials and markdowns from merchants during the holiday shopping season probably restrained the value of overall sales in December. Retail purchases, which aren’t adjusted for changes in prices, probably climbed 0.1 percent last month after a 0.7 percent November gain.
-- “Netting out autos, we look for sales to increase 0.6 percent,” economists at Bank of America, led by Ethan Harris, said in a research report. “Gasoline station sales likely increased due to a gain in seasonally adjusted gasoline prices. The holiday shopping season also ended on a strong note, which should boost overall expenditures.”
-- “With inflation so low and only a modest uptick in gasoline prices, retail sales will not get much of a boost from rising prices in the month,” according to Wells Fargo Securities LLC economists, led by John Silvia. “To make matters worse, fierce competition led to heavy discounting among retailers, which likely kept a lid on growth in December. On the plus side, consumer confidence picked up considerably, and chain store sales posted strong growth.”
-- Britain’s strengthening economy is fueling speculation that the Bank of England may raise interest rates this year. If Governor Mark Carney needs a reason to hold off, he can look to inflation. A report on Jan. 14 is likely to show consumer-price increases stayed at a four-year low of 2.1 percent in December, on a year-over-year basis, just above the BOE’s 2 percent target, according to the median of 32 estimates in a Bloomberg survey. Nine economists, including Michael Saunders at Citigroup Inc., see inflation at the goal or lower.
-- “With the strong economic recovery and rising capacity use, inflation is unlikely to undershoot the 2 percent target by a long way, and deflation risks are low,” said London-based Saunders. “But, with weak domestic cost pressures and considerable labour market slack, the recovery is unlikely to produce significant upside inflation risks for the next two-three years.”
-- Brazil’s central bank on Jan. 15 may slow the pace of monetary tightening by raising the benchmark Selic interest rate 0.25 percentage point after five straight half-point increases as the economy shows signs of decelerating even as inflation quickens.
-- “The slowdown in economic activity is the overarching factor on the rate decision,” Marcelo Salomon, co-head for Latin America economics at Barclays Plc in New York, said by phone. “The central bank is concerned with the outlook of growth. We are already seeing a slowdown in economic activity taking place, and this will continue on into 2014.”
-- “Part of the impact of the rate hikes that we saw in the recent past on inflation is still to materialize,” Alberto Ramos, chief Latin America economist at Goldman Sachs Group Inc. in New York, said by phone. “From April to November they removed the excessive monetary accommodation that was in the system. Now it’s starting to make a difference.”
-- Australian employers probably added 10,000 jobs in December, compared with a 21,000 increase a month earlier, and the unemployment rate held at a four-year high of 5.8 percent, economists projected before government data on Jan. 16.
-- “We expect softness in the labor market to persist over the next year as the economy transitions from mining to non-mining led growth,” said Michael Blythe, chief economist at Commonwealth Bank of Australia in Sydney, who predicts joblessness will peak at about 6 percent. “We think that the participation rate will continue to trend lower, thus limiting the overall rise in the unemployment rate.”
-- Inflation in India probably slowed in December as wholesale prices rose 7 percent from a year earlier, compared with 7.52 percent in November, economists forecast figures to show on Jan. 15. A release on consumer prices, scheduled Jan. 13, may show inflation slowed to 10.09 percent from 11.24 percent over the period.
-- “This downtrend in inflation is likely to continue as vegetable prices stabilize,” Indranil Pan, an economist at Kotak Mahindra Bank Ltd. in Mumbai, said in a research report. “However, it is important to note that the downward trajectory post December 2013 is unlikely to be very sharp, both for the retail and wholesale prices, and that inflation continues to be higher than the comfort levels.”