United States — Consumers Arriving Too Late & Possibly Fleeting?

Pretty much the only material domestic risk overhanging US markets next week will be Thursday's retail sales release for May. It could well be a very solid print, but the bar is very high for it to be enough to rescue the overall quarter, and breadth lies in doubt. May's 8.3% m/m surge in new domestic vehicle sales to the highest level since January 2006 will combine with a 9.8% m/m rise in gasoline prices to lift the dollar value of headline sales up by around a full percentage point. 

The volume of sales is tracking about a 1% quarterly gain in Q2 over Q1 at a seasonally adjusted and annualized rate. This follows a contraction of 1.6% q/q in Q1 that was supposed to have resulted in unleashed pent-up demand in Q2 but so far this has not happened. It would take two back-to-back monthly volume gains of a half percentage point or more to get Q2 consumption growth up to at least 3% over Q1. That may be unrealistic to expect because the surge in May auto sales may be tough to repeat, and breadth will be required beyond just a pick-up in auto sales volumes. Even after incorporating upsides to recent indicators including net exports, the Atlanta Fed still figures that Q2 GDP growth is tracking at about 1.1% at a seasonally adjusted and annualized rate - and thus still far below the potentially lagging consensus, notes Scotiabank. 

Friday's UofM consumer sentiment reading may indicate whether the confidence to drive such spending gains in the near-term is improving following the decline over recent months. Don't expect much by way of monetary policy communications as the Federal Reserve slips into communications black-out on Tuesday ahead of the following week's FOMC meeting. On Thursday, the Fed releases its quarterly 'flow of funds' accounts showing the broad financial accounts of the US economy. This is the release that prompts headlines about changes in household wealth and indebtedness, and broader measures of national finances. The US Treasury auctions 3s and reopens 10 and 30 year issues.