US Retail Sales Stronger Than Expected, But Not Enough for A 100 bps Hike

US retail sales were holding up well until March, but with the jump in consumer prices, they started slowing, and in May retail sales posted a decline of 0.3%. Other sectors of the US economy have slowed, although it is still in a better position compared to Europe and the UK.

Jobs keep increasing and today’s retail sales report is probably the last major data piece before this month’s FOMC meeting. Markets have been undecided between another 75 bps hike or a 100 bps rate hike, after the Bank of Canada delivered such a hike last week, opening the door for other central banks to do so. The report leaned on the strong side, but it wasn’t strong enough for a 100 bps hike.

June 2022 US Retail Sales Data

The control group sales remain soft

• June advance retail sales +1.0% vs +0.8% expected
• Prior was -0.3% (revised to -0.1%)
• Core sakes excluding autos +1.0% vs +0.6% expected
• Prior excluding autos +0.5% (revised to +0.6%)
• Control group +0.8% vs +0.3% expected
• Prior control group +0.0% (revised to -0.3%)
• Ex autos and gas +0.7% vs +0.1% prior
• Prior ex autos and gas +0.1%

Economist estimates range from -0.1% to +2.2% for the headline and -0.6% to +0.7% for the control group. Citing this report and next week’s housing data, Fed Governor Waller said yesterday, “If that data come in materially stronger than expected, it would make me lean towards a larger hike at the July meeting.”

These numbers are certainly stronger than expected and with the revisions to the headline prior, it adds to the case. On the control group, it was above the highest economist estimate (+0.7%) so that sounds like ‘materially stronger’ but note the -0.3 pp revisions lower to last month.

Overall, this is a tough one. It’s certainly stronger but ‘materially’? And we also have to keep in mind that Waller is a hawk so you can’t assume he’s speaking for the whole FOMC. Market pricing has moved to 53%-47% in favor of 75 bps. We will hear from the Fed’s Bostic shortly and Bullard at the top of the hour. I wouldn’t be surprised if others pop up today as well as the blackout starts tomorrow.

Gold XAU Live Chart 

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Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.

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