U.S. Retail Sales to Australian Finger-Pointing: Global Economy

Data this week will probably show retail sales in the U.S. rose in November by the most in five months, while factory production in the U.K. grew in October for a second consecutive month. Elsewhere, the Chilean presidential election may determine whether the country’s companies boost spending, and Australia’s conservative government will probably issue its midyear fiscal review.


-- Purchases rose 0.6 percent last month, the biggest gain since June, led by a jump in demand for automobiles, according to the median forecast of economists surveyed by Bloomberg before a Dec. 12 report from the Commerce Department. The so-called core figures used to calculate gross domestic product, which exclude vehicle dealers and items such as gasoline and building materials, probably climbed 0.2 percent compared with a 0.4 percent gain in October, according to the survey.

-- “Upside in auto sales in part reflected a strong last weekend of the month including good sales on Black Friday,” Ted Wieseman, an economist at Morgan Stanley in New York, said in a research note. “Ex auto sales indications surrounding Black Friday were somewhat mixed. Industry surveys -- which have limited reliability -- pointed to decent growth in traffic during the kickoff of Christmas shopping but lower sales. This may have partly reflected window shopping at the mall turning into actual sales online when people got home and checked prices, as reports pointed to very strong growth in online retail sales.”

-- “The overall trend in retail sales continues to reflect a cautious consumer sector as income growth remains rather weak,” economists led by John Silvia at Wells Fargo Securities Inc. in Charlotte, North Carolina, wrote in a research note. “Initial estimates of Black Friday sales showed consumers spending less over the weekend, but the late Thanksgiving may have pulled some sales forward as retailers started discounting earlier in the week. Autos remain a bright spot in the retail sector, however.”

-- “There may be greater uncertainty about this release than usual, given the timing of the Thanksgiving holiday,” agreed Peter Newland, an economist in New York for Barclays Plc. “As it was late in the month, the Sunday and Monday following the holiday fell in December, whereas they would usually fall in November. The Census Bureau’s seasonal adjustment should account for this, however.”


-- Production probably rose for a second month in October, by 0.4 percent, according to economists in a Bloomberg survey before a report from the Office of National Statistics on Dec. 10. Howard Archer, chief European and U.K. economist at IHS Global Insight in London, says continued growth may depend on overseas demand and the impact of the pound’s strength on exports.

-- “Manufacturers will be hoping that euro-zone economic activity gradually picks up over the coming months following the third-quarter relapse,” Archer said. They “may be becoming increasingly worried by the strength of sterling as it has traded at a five-year high on its trade-weighted index early in December.”


-- On Dec. 12, the Swiss National Bank will probably keep its benchmark interest rate target at zero and maintain its franc ceiling against the euro. While the franc looks less and less overvalued, weak consumer prices warrant the SNB’s cap policy, according to Beat Siegenthaler at UBS AG in Zurich.

-- “The SNB will likely remain inactive for some time as the 1.20 franc per euro floor remains fully justified with headline inflation hovering around zero,” Siegenthaler said in a Dec. 4 note. “However, deflation is not currently a serious risk either, as disinflation is driven by import prices while domestic inflation is positive.”


-- Production growth probably slowed in November to 10.1 percent from a year earlier, according to the median estimate in a Bloomberg survey. The data are due Dec. 10.

-- “The recent softening of the new orders component in various PMI reports could mean moderating industrial production starting in early 2014,” said Steve Wang, Hong Kong-based chief China economist at Reorient Financial Markets Ltd. “Hence, it is worth paying attention to the State Council’s upcoming National Urbanization Conference to gauge the production drivers for next year.”


-- Australia’s conservative government, which ousted the Labor party in a Sept. 7 election, will probably release the nation’s midyear economic and fiscal review this week. Pre-election estimates in August showed the budget deficit widening in the 12 months through June 2014.

-- “This document will contain a lot of finger-pointing at the prior government, hence will be the ‘real’ state of the fiscal books,” said Annette Beacher, head of Asia-Pacific research in Singapore at TD Securities. Investors will be looking out for when the government expects to be back in surplus; how it plans to get there; and when debt levels are expected to peak, she said.

Chile Election

-- Former Chilean President Michelle Bachelet and ruling alliance candidate Evelyn Matthei will face each other in a presidential runoff on Dec. 15. Bachelet, who won the first round with 47 percent of the votes, vowed to increase taxes to fund free education for all. Matthei had 25 percent of the votes on Nov. 17.

-- Bachelet’s tax increase won’t slow growth because it will invest the additional revenue in education and increase competitiveness levels of the Chilean economy, Bachelet’s spokesman, Alvaro Elizalde, said by telephone.

-- Bachelet’s program has generated a significant postponement of investment plans, Rolf Luders, former Augusto Pinochet Finance Minister, said in an e-mail response to questions. “If she wins, and wins with a margin that allows the principal ideas of her program to be achieved, a good part of those postponed projects will definitely be abandoned.”

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