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Joe LaVorgna, Deutsche Bank’s Chief U.S. Economist, recently lowered his GDP growth forecast due to deteriorating economic data.
Looking at the week ahead, he notes that two key pieces of economic data will be of utmost importance, and they both come out on Monday: June retail sales and July’s Empire State Manufacturing survey.Here’s an excerpt from LaVorgna’s note titled Monday May Be The Key Economic Data Day:
The economic calendar is full this week except for Friday, when there are no economic reports scheduled for release. In terms of days, we believe [Monday’s] figures are the most important of the week, because retail sales are a key input into consumer spending, accounting for roughly 30% of all household purchases. Last month, retail sales were soft, but the most troubling parts of the report were the downward revisions to both March and April. Since then, chain-store sales gains have been relatively modest, so Q2 consumption (+1.8%) is likely to be lower than where it was in Q1 (+2.5%).
The New York Fed Empire Survey is the first important snapshot of July factory activity; we are expecting a modest lift in the month. These figures along with retail sales will overshadow the May business inventories report, which is almost never a market-moving event. However, the data could have important implications for Q2 real GDP growth, as inventory building could be less than what we have penciled in (+$50 billion). If so, it is possible we could be looking at growth under 1% in the quarter.