U.S. consumer spending will likely influence markets

Posted by Rico K Setyo

By The Canadian Press

The latest reading on consumer spending activity in the United States will likely set the tone for trading on stock markets this week.

U.S. retail sales for October are released Monday and economists expect to see a rise of 0.9 per cent following a drop of 1.5 per cent during September.

"It looks like that's going to be the big one," said Colin Cieszynski, market analyst at CMC Markets Canada.

Stock markets ended last week higher for a second consecutive week, largely on investor relief from indications that U.S. interest rates will stay low for an extended period.

Markets were also lifted by last weekend's G20 meeting where leaders made it clear that government stimulus measures will not disappear any time soon.

But critical to that growth on markets has been the hope that the end of recession will be followed by a strong recovery.

While retail sales are important in any economy, they're particularly important in the United States where consumer spending accounts for about 70 per cent of the economy.

And there are searing memories of what happens when consumer strength collapses.

"When the U.S. consumer got tapped out, that was one of the big things that led to the collapse of the housing market and that dragged down the whole banking system with it," observed Cieszynski.

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