US retail sales were slightly softer than expected in July, showing some moderation in growth following the strong rebound in Q2. This is much in line with our expectation that the US economy will see some moderation in growth in H2 from the 4% pace in Q2 to 3-3.5% in H2.
The retail sales control group rose 0.1% m/m (consensus: 0.4% m/m) and was revised a bit lower for June to 0.5% m/m from 0.6% m/m. After some swings in retail sales related to the weak winter sales and the rebound in Q2, sales are reverting to the trend seen in past years.
The deceleration in growth also suggests that we should expect a moderation in ISM indices for both manufacturing and non-manufacturing over the coming three-four months. This may ease the pressure a little bit on the Fed. However, we do believe that job growth will continue to be robust and unemployment will move lower, which we believe will lead to a first hike in April next year, six months after the end of tapering.
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