US Consumer in Focus Again After Strong May Sales

U.S. futures are slightly lower ahead of the open on Wall Street on Friday, as investors eye up the latest inflation and consumer data from the world’s largest economy.

There isn’t too much data being released today but the couple of pieces that are due from the U.S. will be of great interest to investors. Retail sales rebounded strongly in May which has eased some concerns that consumers were refusing the spend the additional disposable income from lower oil prices that was expected to offer a boost to the economy. Consumer sentiment has remained high throughout that period and now that wages are growing as well – 2.3% on an annualized basis in May – it looks like they’re finally starting to loosen the purse strings a little.

A pick up in the UoM consumer sentiment reading today would suggest that sales could go from strength to strength. All the pieces are in place for strong consumer driven growth in the coming months, all we need now is for consumer sentiment to remain high or even improve. Higher spending should bring inflationary pressures although they will continue to be under pressure by the stronger dollar, which makes imports cheaper.

The PPI readings over the last six months have been mostly negative reflecting the strength in the dollar but they appear to have eased in May. The dollar has pared some of its large gains over the last few months which has eased the pressure on the PPI. In May it is expected to have risen by 0.4% which will be a relief to U.S. exporters and could feed to into the other inflation measures in the coming months. This again could be another supporting factor behind the Fed hiking interest rates this year.

We are on course for a more negative end to the trading week after talks between Greece and the International Monetary Fund broke down, with the latter returning to Washington. This comes only six days before the eurogroup meeting, where a deal will need to be signed off in order for Greece to receive the funds by 30 June, repay loans to the IMF and pay public sector wages and pensions.

The decision by the IMF to walk away from talks does not represent an end to negotiations, instead it is a warning that they are no longer willing to continue with the current status quo in which no meaningful progress has been made. The deadline is fast approaching and Greece needs to offer concessions in areas that it has so far been unwilling. Until then, the IMF doesn’t appear to be interested in having further talks.

Something like this was going to have to happen at some point. One side is going to have to offer some serious concessions if a deal is going to be reached. If this doesn’t happen as we approach the meeting next week, you have to question the desire of both parties to reach an agreement. Until now Greek Prime Minister Alexis Tsipras has argued that his election victory gave him a mandate which has enabled him to be tough, but that mandate also included Greece remaining in the euro and polls show more people want a deal to be reached. If he allows Greece to default, regardless of the deal at this stage, he has broken his mandate.

The S&P is expected to open 1 point lower, the Dow 14 points lower and the Nasdaq 3 points lower.

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Craig Erlam
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the BBC and The Telegraph, and he also appears regularly as a guest commentator on Bloomberg TV, CNBC, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.