Market Wire: Retail Sales Crush Expectations, Pushing Yields and Dollar Higher

CalendarApril 15, 2024
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US retail spending smashed forecasts last month, suggesting that underlying consumer demand remains remarkably healthy. According to figures published by the Census Bureau this morning, so-called “control group” retail sales sales - with gasoline, cars, food services, and building materials excluded - surged 1.1 percent in March, topping forecasts set at 0.4 percent.

Total receipts at retail stores, online sellers and restaurants jumped 0.7 percent on a month-over-month basis in March, up 2.4 percent over a year prior. Markets were expecting a 0.4-percent monthly headline gain after February’s 0.6-percent increase.

Gas station sales climbed 2.1 percent month-over-month as gasoline prices moved higher. Motor vehicle and parts dealers posted a -0.7 percent loss. Receipts at food services operations rose 0.5 percent, grocery store sales were also up 0.5 percent, general merchandise stores climbed 1.1 percent, and non-store retailers advanced 2.7 percent. The prices-paid component hit its highest levels since last May.

Ten-year Treasury yields are spiking higher, and the dollar is climbing as traders further lower the odds on a rate cut before the Federal Reserve’s September meeting. The central bank’s repeated assertion that policy rates are in "restrictive" territory - perhaps defined by the difference between the real Fed Funds rate and the Holston-Laubach-Williams estimate of the "natural" rate of interest - look ever more difficult to justify, with activity indicators following market valuation-driven indicators in pointing to a wholesale loosening in financial conditions. Chair Powell could have little choice but to reset the clock on rate cuts in upcoming appearances.

Author

Karl Schamotta

Karl Schamotta

Chief Market Strategist

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