US: After retail sales and PPI numbers we favor a Q1 Fed rate hike - ING

James Knightley, Senior Economist at ING says that today’s US economic data (retail sales and PPI) do not offer support to the view of an imminent rate hike from the Federal Reserve.

Key Quotes:

“US retail sales for July are disappointing, coming in flat on the month versus expectations of a 0.4% MoM gain. There was a modest upward revision (2 tenths of a percentage point) to June’s figure, but it is still a miss.”

“Looking at the “control group” which excludes volatile items and has a better relationship with overall consumer spending growth, it was also flat on the month. This suggests that after a pretty disappointing 2Q GDP, the economy isn’t exactly roaring ahead at the start of 3Q16.”

“We have also had some softer than expected producer price inflation numbers, with the headline annual rate dropping into negative territory at -0.2%YoY, while the core (ex food and energy inflation rate slowed markedly to 0.7%YoY from 1.3%. So with activity being softer than hoped and pipeline inflation pressures looking benign it doesn’t offer much support to the view the Fed will be hiking rates imminently. We favour the next Fed move higher to come in 1Q17.”