Chart of the week: so far so good
Data-driven insights and analysis from our investment team every week.
New higher tariff rates were implemented in the US during August. The main question is: what impact will the tariffs have on economic activity? We have already seen some slowness in the labour market, with non-farm payrolls showing very little growth. However, last week brought a more positive data point – retail sales for August were stronger than expected.
As shown in the chart below, there was a noticeable spike in the year-on-year growth rate for retail sales. It’s important to note, though, that retail sales are reported in nominal terms, meaning the figures include price changes. So, higher tariffs that push up prices can make it look like activity is increasing, even if the real, underlying activity is more subdued.
Still, the rise in the year-on-year growth rate is encouraging. While real activity may not be as strong as the headline number suggests, it does not indicate a material slowdown. It is still early days, and more tariffs will come into effect over the next few months, so we will continue to monitor the situation closely. For now, the retail sales report does not point to any major disruption in the US economy.
