The US economy seems to have averted the risk of a 'double-dip recession' but the recovery remains weak and uncertain. May data released today by the Commerce Department show that consumption is struggling to take off again. Retail sales fell 0,1% from April, a figure weighed on by the difficulties of the Japanese auto sector and suppliers following the earthquake damage. The trend data marks 7,7% on an annual basis, but the signs of a slowdown in consumption are multiplying, now that the stimulus package for the economy is gradually withdrawn and household budgets remain weighed down by the debts of the subprime crisis.
Increase higher than expected for producer prices, +0,2% compared to April. The figure is still affected by the surge in energy prices, but is down compared to the increases in previous periods, a sign that the effect of crude oil on production costs is now receding.
With a tight labor market, the new data does not make the current negotiations between Democrats and Republicans on the federal government debt ceiling easier. The current limit of 14,3 trillion dollars will be reached on August 2: without an increase in the ceiling, the US risks a technical default on its debt. Five days ago the rating agency Fitch announced a downgrade of US securities in the absence of intervention. President Obama warned Congress today, with the House in the hands of the Republicans, that without a deal the United States "could experience a new financial crisis and the entire global financial system will be at risk." Democrats would like to raise taxes while keeping public spending unchanged; Republicans are reluctant to accept higher public debt without budget cuts.
