Stay Connected

Our News Centre and Blog is your link to a dynamic network of information, people, and ideas curated by our FX and payments experts.

Market Wire:
Retail Sales Surge, Reducing Odds On Sustained Monetary Easing

Karl Schamotta July 16, 2019

American consumers continued to spend last month, with a surge in retail sales helping to offset market fears of a slowing economy. Numbers released by the Census Bureau this morning show that receipts rose 0.4% in June, up 3.4% over the year prior as households increased spending on a wide range of products. Markets had expected growth to hit 0.1%.

So-called “control group” sales – excluding food services, auto dealers, gas, and building materials – rose 0.7%. This beat expectations, and will carry importance for the Federal Reserve’s preferred inflation measure – the core personal consumption expenditures index – which also strips out more volatile spending categories.

Data for April was revised down to 0.4% from the 0.5% previously reported.

The print is unlikely to dissuade the Federal Reserve’s rate-setting committee as it prepares to ease monetary policy at the end of the month – but it adds to evidence showing that the economy is staging a solid rebound after a soft first quarter. Consumer spending is helping to offset losses in business investment and will likely cut into the inventory overhang that emerged earlier in the year – helping to stabilize overall gross domestic product projections.

With traders lowering odds on a meaningful series of rate cuts, a steepening yield curve should help to limit the losses that the dollar typically suffers as an easing cycle begins.

In contrast, the euro is down, and 10-year bund yields are trading at -0.31% this morning after a survey by the Center for European Economic Research (ZEW) showed that views on the German economy continued to deteriorate in July. Tensions in the Middle East, a slowdown in exports to China, and uncertainties surrounding the United Kingdom’s divorce process were mooted as factors in pushing the sentiment index down by 3.4 points to 24.5 – near lows reached in October last year.

Bottom Line: US consumers remain blissfully unaware of the darkening clouds over the global economy – which, ironically, helps to brighten prospects for the selfsame global economy. When combined with the central bank-assisted easing in financial conditions that has occurred over the last two months, the stage is set for continued strength in economically-sensitive assets and currencies.

Karl Schamotta
Chief Market Strategist


To receive our market updates and research reports first before they hit the blog subscribe!

Popular Tags

cambridge Market Wire

How can we help you?

Let us get to work on helping you today.

Thank You. We’ll be in touch within 24 hours.