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Robust Retail Report Reflects Consumer Resilience

Don Curren September 13, 2019

Retail sales data for August indicated household spending in the US remained vigorous in midsummer, suggesting consumer sentiment continued to be resilient despite the global trade tensions roiling global financial markets and unsettling businesses.

Sales growth slipped from July’s upwardly revised pace but exceeded expectations and supported the perception the US consumer had been largely shrugging off escalating trade tensions as recently as August, and is not yet unduly alarmed by widespread discussion of the possibility of a recession.

The US Census Bureau reported Friday its seasonally adjusted advance estimates of US retail and food services sales for August 2019 $526.1 billion, an increase of 0.4% from the previous month, and 4.1% above August 2018.

Economists had expected all-items retail sales to rise 0.2% in August from July after the earlier-reported 0.7% increase in that month which was revised to 0.8%.

Excluding autos, sales were unchanged for the first time since February. Economist had expected retail sales ex autos would expand by 0.1% in August. The “retail control group,” which excludes autos, gasoline, building materials and restaurants, was up 0.3% after a 0.9% rise in July.

The backward-looking data is not likely to have much impact on the Fed’s forward-looking, insurance-style interest rate stance, and investors aren’t likely to significantly adjust their expectations the US central bank will announce another cut in interest rates after its policy-setting FOMC meeting ends next Wednesday.

Late Thursday, US interest-rates futures markets were pricing in a roughly 87% chance the US Federal Reserve will cut its Federal Funds target range to 1.75% to 2% from its current setting of 2% to 2.25%, according to data from the CME Group.

The data may, however, help call into question the duration of the Fed’s policy easing, characterized by as a “mid-cycle adjustment” by Fed Chair Jerome Powell.

The trade-weighted dollar index rose modestly after the release, but remains down about 0.2% from Thursday’s close.

Don Curren
Market Strategist and Content Editor

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