Right, so retail sales is the big one in the U.S. today.
Here are the estimates and priors:
- Retail Sales Advance MoM, est. 0.3%, prior -0.2%
- Retail Sales Ex Auto MoM, est. 0.3%, prior -0.2%
- Retail Sales Ex Auto and Gas, est. 0.4%, prior -0.1%
- Retail Sales Control Group, est. 0.4%, prior -0.1%
A couple of things to note here. First of all, a beat has the potential to supercharge risk-on sentiment that began to show up overnight first in USDJPY following reports that Kim Jong Un has backed off absurd threats to bomb Guam and then gained further momentum as the session wore on. Have a look at the dollar and yields:
The other thing to note here is that this print is a little more “clean” in terms of how markets can read it. That is, the calculus with something like CPI has to take into account the extent to which “bad news is good news” for risk assets on any given day because inflation has a direct impact on the Fed’s reaction function. Whereas with something like retail sales, markets are more free to interpret good news as simply good news. Because barring some kind of monumental blowout print, an isolated beat in retail sales isn’t going to be something the Fed reads and thinks “ok, now we really need to get moving.” It can be part of a broader argument about the economy improving, but it’s nothing that’s going to make policymakers think they’re woefully behind the curve (compared to something like a sudden acceleration in AHE, for instance).
“Investors seem unconcerned (and/or unconvinced) by the prospect of higher Fed rates as the bulk of recent commentary from policy makers emphasized below-target inflation.,” Bloomberg’s Anchalee Worrachate wrote this morning, adding that “a more steady stream of positive U.S. data surprises — starting with today’s retail–sales report — would certainly help convince markets that economic weakness in 1Q was in fact transitory.”
As a reminder, retail sales have fallen short of expectations for past three months, leading to gains for Treasuries. So there’s some precedent here worth taking note of.
“A bounce seems overdue, especially since fundamentals in the household sector have remained generally favorable,” NatWest wrote today. “In particular, consumer confidence remains high, supported by ongoing strength in the labor market.”
Without further ado, here are the numbers and drumroll….. beat:
- U.S. July Retail Sales Rose 0.6% vs Est. 0.3%
- Retail sales less autos rose 0.5% in July, est. 0.3%
- Retail sales rose to $478.873b in July vs $476.009b in June
- Retail sales ex-auto dealers, building materials and gasoline stations rose 0.5% in July
- Retail sales ‘control group’ rose 0.6% m/m in July
And here’s the knee-jerk (DXY, USDJPY, 10Y yield):
