Morgan Stanley identifies next wave of AI-linked "alpha"
Friday’s US data was disappointing in various circles. In the end it probably has more individuals shifting into a neutral tapering “dollar amount camp” for next weeks FOMC meet.
US retail sales were soft in August, rising just +0.2% in total and +0.1% ex-autos. On the plus side were the upward revisions to the previous two-months. An eternal optimist would have individuals deciphering the modest rise in a positive light – the trajectory of spending still seems to be rising at a healthy pace. The August sales level was +5.1% annualized above Q2, led by a rise in motor vehicles. The weakness was in the large department store categories, falling -0.1%.
Consumer spending will be seen as the key to pickup in growth in H2. Tax hike drags are expected to fade and if you combine better domestic fundamentals this should lead to consumer finances improving even further. To date, rising salary incomes have helped to increase family wealth and are repairing many balance sheets.
However, consumer sentiment seems to be a problem, which will probably add to concerns about the pace of growth in H2. The University of Michigan consumer sentiment index fell to 76.8, way below the consensus print of 81.8. The Fed is expected to still move to taper next week but the recent soft data certainly supports a gradual approach from Bernanke and company. This would certainly appease Lagarde at the IMF, both the ECB and BoE and more importantly the EM economies.
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