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Market Wire
Retail Sales Fall to Six-Month Low

Karl Schamotta September 14, 2018

Retail sales in the United States rose by less than expected in August, suggesting that strong economic momentum could weaken somewhat into the autumn months. Commerce Department numbers released this morning showed that households reduced spending on vehicles and clothing, cutting growth in overall retail receipts to 0.1 percent on a month-over-month basis – lower than the expected 0.4 percent increase. Excluding automobiles, gasoline, building materials and food services, retail sales improved 0.1 percent last month. This “core” measure corresponds most closely with the consumer spending component of gross domestic product.

On the positive side of the ledger, data for July was revised higher to show overall sales rising 0.7 percent, instead of the previously-reported 0.5 percent gai – underlining robustness in consumer demand. Tax cuts and increased fiscal spending are intersecting with tight employment conditions and rising wages to lift household spending – putting the foundation in place for continued growth in the third and fourth quarters.

Weaker American inflation data published yesterday continues to inflict pain on the greenback, driving the trade-weighted dollar index toward a third weekly loss. With the Bank of England and European Central Bank issuing more hawkish forecasts, and emerging market temperatures dropping to a low boil, both yield-chasing and safe haven flows look set to continue their reversal into the weekend.

Bottom Line: Despite a slightly-disappointing August retail sales number, overall spending is up 6.6 percent relative to levels that prevailed last year. The United States remains the world’s most powerful consumer-of-last-resort, with household spending levels sufficient to lift growth in those countries that supply it with goods. Trade war rhetoric notwithstanding, the bull case for exporter currencies continues to strengthen – particularly relative to the narrative surrounding the dollar itself.

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