What to watch for

The economic calendar was light this week in the US but there are some more-notable releases in the week ahead.


  • Monthly federal budget statement



  • Empire Fed
  • Industrial production
  • Beige Book


  • Retail sales
  • Initial jobless claims
  • Housing starts


  • U Mich consumer sentiment
  • Fed’s Williams

The focus will be on virus data again but earnings are starting to roll in and the Fed blackout starts Friday at midnight so this week will be the time to send any messages.

The focus will be on the consumer. Here’s what CIBC says about the retail sales report, which they expect to show a 3.6% rise in the control group vs the 3.8% consensus.

The continued relaxation of social distancing should have supported further growth in retail sales in most of June, but a resurgence in Covid cases towards the end of the month in some of the most populous states could have limited gains somewhat. A 5.2% advance in headline sales is consistent with the further release of pent-up demand following the end of lockdowns, and includes a bump in gasoline sales as people returned to driving and gasoline prices rose. That would still leave retail sales roughly 4% below where they stood prior to the pandemic. The control group of sales which excludes autos, gasoline, building materials, and restaurants, should have registered a more moderate gain of 3.6%, which would leave them further above their pre-pandemic level, as sales in that group were bolstered by online purchases and stockpiling throughout much of the lockdown. However, they are still tracking -11% in annualized terms over the second quarter.

Forecast Implications-With the threat of the virus growing and many states retreating on reopening, consumers are beginning to show more caution in movement and spending, something that should limit gains in retail sales in July. Given that the bulk of consumer spending occurs on services, consumption for the second quarter should look much worse than what is implied by retail sales. And with unemployment expected to remain elevated in the medium term, discretionary purchases should begin to level off.

Market Impact-We are only slightly less optimistic on the control group than the consensus, and markets will likely remain concerned with the acceleration in Covid cases clouding the consumption outlook in the coming months

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