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According to National Bank of Canada analyst, Krishen Rangasamy, the US economy is not as bad as “advertised” taking into account today’s numbers from retail sales and industrial production. He points out consumer strength is offsetting weakness in factory activity.

Key Quotes:

“Don’t write off the U.S. economy so fast. Granted, these days it’s easy to be pessimistic with the ongoing trade war, stock market plunge and the herd screaming “yield curve inversion”. And disappointing data such as this morning’s industrial production, which showed manufacturing contracting in July on a year-on-year basis, may reinforce bearish sentiment. But at this point the real U.S. economy isn’t as bad as advertised. Note that manufacturing sector woes aren’t a U.S.-specific issue considering the escalating trade war has hit supply chains and hence factories around the world. What gives us encouragement about the U.S. is its consumers.”

“A buoyant labour market, an upwardly revised personal savings rate, positive housing wealth effects, low debt relative to net worth, declining interest rates and a sound financial system which continues to allow for healthy credit growth, all suggest there is room for consumption to thrive.”

“Discretionary retail sales continue to grow at a solid pace, providing more than just an offset to a struggling manufacturing sector. So, while the U.S. economy is set to move down a gear after registering above potential growth in the first half of the year, don’t expect an outright collapse just yet.”