The key with any US data is what are the implications on the prospects of the Fed tapering QE. Will Retail Sales missing estimates make a difference to the Fed?
If the initial market reaction of USD strengthening is anything to go by, then probably not.
However, core Retail Sales were forecast to grow in the month of May, but disappointingly fell for a second successive month.
Coming at the same time that the US PPI (factory gate inflation) increased more than expected and the New York Fed Manufacturing index also fell more than expected, this comes as something of a disappointment.
But the disappointment could be impacting more on risk appetite as equities have fallen and USD has rebounded slightly. The Fed would want to start tightening monetary policy for the right reasons. Needing to tighten to stave off inflationary pressures whilst the labor market is over 7m jobs below its peak of February 2020 would not be tightening for positive reasons. So, this will add emphasis on the Fed having to justify its position.
They will need to be sure that the “transitory” argument on inflation is just that, but a year on year increase of 6.6% in headline PPI for the month of May is further warning.
Falling Retail Sales do not help, but coming in May which was a month without stimulus cheques may help to explain away at least some of this miss.
DATA: 14:30 *(US) MAY ADVANCE RETAIL SALES M/M: -1.3% V -0.8%E; RETAIL SALES (EX-AUTO) M/M: -0.7% V 0.4%E - Retail Sales (ex-auto/gas): -0.8% v 0.0%e - Retail Sales (Control Group): -0.7% v -0.5%e (**Note: used for GDP calculations) - Prior Advance Retail Sales revised higher from 0.0% to 0.9% - Prior Retail Sales (ex-auto/gas) revised higher from -0.8% to +0.1% - Prior Retail Sales (control group) revised higher from -1.5% to -0.4% - Reference link: http://www.census.gov/retail/marts/www/marts_current.pdf
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