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US retail sales for May are disappointing

US retail sales for May are disappointing, rising 0.1% month-on-month versus the 0.3% consensus while April was revised to show a 0.2% contraction rather than the 0% outcome initially reported.

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Experts expect consumer spending to continue cooling through this year as flat real household disposable incomes constrain spending power while the exhaustion of pandemic-era accrued savings means there are fewer resources from this pot to keep spending going. High consumer credit costs make borrowing to fund spending painfully expensive too, with net credit card lending actually contracting in April. Throw in declining consumer confidence readings and it all points to a consumer sector that is set to become more cautious, especially if unemployment continues to rise.

US industrial production on the other hand, is much stronger than expected, rising 0.9% MoM versus the 0.3% consensus forecast. Manufacturing output rose 0.9% led by a 2.3% surge in machinery production. Utilities output increased 1.6%, which is a function of the weather while mining output increased 0.3%. Manufacturing payrolls and hours worked did increase in the month, hence expectations for a rise, but this outcome is more than anyone was forecasting.

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