What’s the Story?

by CC May 15, 2012 8:59 am • Commentary


Sales at U.S. retailers barely rose in April as the boost from an unseasonably warm winter faded, pointing to some loss of momentum in consumer spending early in the second quarter.

Meanwhile, consumer prices were flat in April as households paid less for gasoline and natural gas, possibly giving the Federal Reserve more room to help economic growth should the recovery stumble.

Retail sales edged up 0.1 percent, held back by a decline in receipts from building materials and clothing stores, the Commerce Department said on Tuesday. That was the smallest gain since December when sales were flat.

March’s sales were revised slightly down to show a 0.7 percent rise rather than the previously reported 0.8 percent increase. Economists polled by Reuters had expected retail sales to gain 0.2 percent last month.

In the 12 months to April, sales rose 6.4 percent.

The Labor Department said on Tuesday its Consumer Price Index was unchanged last month after rising 0.3 percent in March. April’s increase was in line with economists’ expectations.

Outside the volatile food and energy category, inflation pressures also appeared to be modest. Core CPI edged up 0.2 percent, matching the increase posted in March.


Germany pulled the euro zone’s economy back from the brink of recession at the start of 2012 but stagnation in France and contraction in southern Europe underlined sharply differing fortunes in a bloc laboring under the effects of austerity.

Overall gross domestic product was unchanged in the first quarter following a dip at the end of last year, data showed on Tuesday, meaning that the euro zone missed slipping officially into recession by the narrowest possible margin.

But a surprisingly strong showing from Germany, whose exporters are helping it to cope with the euro zone crisis, flattered dismal performances in most of the other major economies.



That’s the euro-zone GDP figure out this morning. Economic output in the 17-nation currency union in March was 0.0% higher than in February and 0.0% higher than last March, according to statistics agency Eurostat.

At least it’s not negative, the markets are saying. Flat is the new up.

But don’t get too excited. The data also show diverging fortunes persisting inside the euro zone, which will make recovery from the crisis difficult. Germany grew 1.5% year over year, and France, Austria and Belgium managed small gains. But Spanish GDP was down 0.4%, Italian 1.3%, Portuguese 2.2% and Greek a staggering 6.2%. (No data is yet available for Ireland.)

Italian GDP fell 0.8% from the prior quarter, which missed estimates.


Greece is set to repay fully a €450m bond that matures on Tuesday after failing to reach a deal with holdout investors including private banks and a US-based hedge fund.

The expected move marks a significant twist in the restructuring of Greece’s debts. “It was considered imprudent to default on a bond issue at a moment of political instability, when the country’s membership of the euro is being questioned,” said an official involved in the transaction.

The bond was issued under UK law unlike the €177bn of Greek-law sovereign debt held by private sector creditors which was restructured in March with investors taking a 75 per cent loss on their holdings.

Greece has enough funds to cover the repayment after receiving a €4.2bn transfer last week under its second bailout agreement with international lenders, a senior banker said.