Bets on US recession ‘badly misplaced’ after strong retail sales

Bets on the US economy tipping into a recession “look badly misplaced” as consumer spending shows little sign of cooling amid historically high inflation

That’s according to Wall Street analysts’ assessment of new retail sales data published today illustrating the US consumer is shaking off soaring living costs.

Retail sales jumped 0.9 per cent over the last month, broadly in line with expectations. However, March sales estimates were upgraded to 1.4 per cent from 0.5 per cent.

“Never bet against the US consumer,” Paul Ashworth, chief north American economist at Capital Economics, said, adding the ongoing strength in household consumption indicates speculation that America is headed for a slump are “badly misplaced”.

Stateside inflation is still running at a four decade high of 8.3 per cent despite edging back over the last month.

Core inflation – a more accurate measure of the severity of underlying price pressures – surprised to the upside recently.

Robust spending will strengthen the US Federal Reserve’s resolve to push ahead with what is expected to be the quickest tightening cycle in recent history.

“Together with the surprising strength of core CPI last month, this is another reason to expect the Fed to continue hiking rates by 50bp per meeting, despite the recent swoon in stock markets,” Ashworth added.

New UK inflation figures are published tomorrow and may reach as high as 9.3 per cent, Deutsche Bank said.

The cost of living in Europe climbed to the highest level since the creation of the euro in 1999 last month, scaling to 7.5 per cent.

The Bank of England has lifted rates from a historic low of 0.1 per cent to a 13-year high of one per cent in just six months.

The European Central Bank has left rates in negative territory for a decade, but markets think it will be forced to act this year.