10Y bonds dollar economy

Retail Sales! Who’s Excited?!

As a reminder, this is the marquee data point in the U.S. this week and it will be yet another opportunity for the market to assess the new, U.S.-centric growth narrative.

Ok, here comes retail sales.

As a reminder, this is the marquee data point in the U.S. this week and it will be yet another opportunity for the market to assess the new, U.S.-centric growth narrative that’s underpinned the greenback and stoked speculation that we’ve transitioned from a world defined by “synchronous global growth” to a situation where the data continues to surprise to the downside in Europe.

Although the data across the pond out this morning was backward looking, it did underscore the notion that the European economy may have peaked in Q1, the ECB’s “transitory” narrative notwithstanding.

The burgeoning “U.S.-centric” story has lent more credence to the notion that recent dollar strength is likely to be more than fleeting as the restoration of the greenback’s correlation with 10Y yields and rate differentials combined with nascent signs of inflation pressure and what that pressure entails for the Fed creates a self-feeding loop for the currency.

Notably, the dollar has rebounded after falling for the first week in a month on the heels of the CPI miss last week:


Meanwhile, 10Y yields are back above 3% after climbing Monday following a bund selloff catalyzed by hawkish comments from the ECB’s Villeroy’s who kicked off a flurry of block trades:



Here’s 10Y yields in the U.S. headed into retail sales:


For those who missed it over the weekend, this is BNP’s take on today’s headline datapoint:

The main data point in focus next week is the April retail sales report, which will give us an indication of consumer spending to start the second quarter. Both retail sales and overall personal consumption started the year slower than we expected, with control group sales (which exclude autos, gas, and building materials) declining by 0.4% from December through February, after expanding by a heady 2.6% from September through November of last year. This slowdown was reflected in overall personal consumption growth in the first quarter of the year, which slowed to 1.1% q/q saar from 4.0% q/q saar in Q4 2017.


And this is what BofAML has to say:

We forecast that retail sales grew by 0.2% mom in April, implying modest deceleration in spending from March’s reading of 0.6%. Excluding autos, we look for retail sales to increase by 0.3% mom, while we expect 0.2% mom for core control retail sales. We find evidence in our latest BofA on USA that unseasonably cold weather conditions in April held down consumer demand. Moreover, the recent rise in gasoline prices likely forced consumers to shift spending toward gasoline, reducing spending in more discretionary categories. The weather impact should prove temporary, but rising gasoline prices are likely to persist, eating away at some of the positive after-tax income gains seen post tax reform. We remain cautiously optimistic on the trajectory of consumer spending, but a weak reading in April raises the specter of another disappointing quarter of consumer demand.

As a reminder, here’s what the gas price picture looks like:


Without further ado…

Estimates and priors

  • Retail Sales Advance MoM, est. 0.3%, prior 0.6%
  • Retail Sales Ex Auto MoM, est. 0.5%, prior 0.2%
  • Retail Sales Ex Auto and Gas, est. 0.4%, prior 0.3%
  • Retail Sales Control Group, est. 0.4%, prior 0.4%


  • U.S. April Retail Sales Rose 0.3%
  • Retail sales less autos rose 0.3% in April, est. up 0.5%
  • Retail sales ex- auto dealers, building materials and gasoline stations rose 0.3% in April
  • Retail sales ‘control group’ rose 0.4% m/m in April
    • Retail sales ‘control group’ excludes food services, automobile dealers, building materials and gasoline stations
  • Auto dealer y/y sales rose $4.3b in April to $94.2b



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