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US Retail Sales Stay Strong in December

Adam Corbett January 16, 2020

Retail sales in the world’s largest economy continued their trajectory higher in December, with the print coming in line with expectations at 0.3% month-over-month.

Retail sales data is a useful leading indicator for the economy, acting as a kind of peephole for the Federal Reserve on where the economy may trend near term. Consumer expenditure makes up over 70% of the US economy – and the healthy reading on December retail sales suggests the 10-year economic expansion is chugging along.

While the data were consistent with continued solid growth, they had a muted effect on currency markets. We did see marginal action in the trade-weighted dollar index, as it ticked up upon release of the data, but has since retraced a portion of the move.

The healthy reading was driven by most segments, with auto sales the only sector experiencing declines for the month, the US Census Bureau reported. Excluding autos, sales came in at 0.75% month over month.

December marks the third consecutive month where retail sales increased by at least 0.3%, displaying the purchasing power of the US consumer. This comes in an environment with marginal wage growth and inflation well below the Fed’s target.

Separately, the Department of Labor’s weekly jobless claims data attested to the labor-market strength that underpins the robust retail sales. The Department reported initial jobless claims fell for the fifth week in a row, dropping by 10,000 in the week of January 11th to 204,000, the lowest reading since the end of November.

While markets are pricing in expectation of a 25-basis-point cut by the end of the year, there is not a clear consensus on the timing.

But economic data may continue to take a back seat to economic data, as it has frequently through the Trump administration.

US dollar buyers may be tempted to take advantage of these relatively low levels, but sellers may have to wait patiently for another Trump tweet to stir markets in their favor.

Adam Corbett
Currency Analyst & Team Lead – Business Development

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