Hot on the heels of a batch of positive economic data from China this morning, US retail sales figures for November beat expectations, further cementing the path to economic recovery on which we wander.
Hot on the heels of a batch of positive economic data from China this morning, US retail sales figures for November beat expectations, further cementing the path to economic recovery on which we wander.
Retail sales rose by 1.3% during November, far exceeding the 0.6% that had been anticipated by analysts. [1] This was the biggest increase in three months, and points to a solid beginning to what is a vital time of the year for retailers.
‘It suggests the holiday shopping season got off to a pretty good start despite the weak weekly data that we’ve seen’ said John Canally, of LPL Financial.
‘It keeps the recovery on solid footing. The risk of a double-dip ebbs with every strong report we get.’ [2]
And the good news kept on coming, as preliminary figures from a survey by the University of Michigan pointed to burgeoning optimism among consumers. The survey polls a number of households regarding their thoughts on the state of the economy and of their own finances, in order to compile an index that gauges consumer sentiment.
The index for December was 73.4, up from November’s level of 67.4. Once again, this surpassed the consensus of analyst expectation, as 68.9 had been the expected reading. [3]
It’s worth bearing in mind that the figure released today is a preliminary reading, based on data from only 60% of those surveyed and therefore is less statistically robust than the final reading which will be released on the last Friday of December.
No doubt the index will be subject to some kind of revision later on in the month, but nevertheless, I see today’s result is as an unambiguously positive sign.
The road to recovery is a slow process, of course, but we have seen in quick succession now a series of statistics that indicate economic growth.
We found out yesterday that the US trade gap is narrowing; this morning showed that the fires of Chinese industry are once again roaring and that UK manufacturing costs are inflating; and now we have healthy retail sales and consumer sentiment in the US.
Unsurprisingly, stocks on Wall Street responded to the news in upbeat fashion, with the DJIA extending yesterday’s gains by climbing 40 points or 0.4% to 10445 by 3.00pm London time. The broader gauge of the S&P 500 Index told a similar story, adding 0.3% to stand at 1106, while the tech-driven Nasdaq 100 also rose 0.4%.
Dow Jones Industrial Average component Boeing rose 0.8% to $55.43 following its announcement yesterday that test flights on its 787 Dreamliner could start imminently.
The new jet is two years behind schedule, but if the company is able to successfully test fly the light-weight, carbon-composite plane in 2009 it would help restore some lost credibility.
Rob Stallard, of Macquarie Securities, raised his price target for Boeing to $60 from $53, writing in a research note that ‘For Boeing to finally get the 787 into the air is a step in the right direction for the program, following a catalogue of errors and disappointments… We think this will have a positive impact on investor sentiment for the stock, and for the wider aerospace sector.’ [4]
United Technologies Corp, another DJIA component, rallied 1.75% to $69.12, after a statement from the US technology manufacturer and service-provider that the company is expecting to see earnings climb around 10% in 2010.
‘UTC’s 2010 outlook presentation offered broad-based improvement across virtually all of its businesses next year, based almost entirely on internally generated performance improvement,’ said analyst Nicholas Heymann of Sterne Agee in a research note. [5]
European stock markets have largely held on to this morning’s gains without making any real further progress. By 3.30pm London time, the FTSE 100 was trading up 0.8% at 5285, while the German DAX was up 1.2% at 5778.
So, the markets are not overdoing it in response to the upbeat economic data; instead we are seeing steady, measured advancement. In other words, just what we need. Let’s hope we can see more of the same next week.
[1], [3], Expectations based on surveys conducted by Bloomberg
[2], [4], [5] Reuters 11 December 2009
By Peter Martin, Director, Client Education and Training, IG Index.
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