Retail Sales Quick Analysis: America's Economic horror comes to light and why it is dollar-positive

US Retail Sales figures for March plunged by 8.7%.
Groceries and health buying prevented a more precipitous fall.
Fears of disastrous data in April may extend the market rout.
The safe-haven dollar has room to extend its gains.

Yohay Elam FXStreet

Food and beverage sales are up 28% – and the overall volume still fell by 8.7% – the biggest fall on record

Other standouts are health and personal care stores and online retailers which have experienced double-digit increases. However, clothing spending was halved, motor vehicle and parts plunged by a quarter and department store consumption is down by a fifth.

During March, America transitioned from an open economy to "shelter in place" orders. The report reflects stockpiling and refraining from other on-site shopping.

However, this horror may be only the beginning. Unemployment began rising during March and has worsened in April. While restaurants cannot be closed twice, consumption of other goods may fall due to uncertainty – both for those employed and especially among those that lost their jobs. Jobless claims figures are pointing to losses of over 10 million positions.

Sales figures for April are due out only in mid-May, but fears that this is only the beginning are already seeping into investors' minds. To add insult to injury, the New York Federal Reserve's Manufacturing Index collapsed to -78.2 points, the lowest on record. The Empire State is the worst hit.

Why the dollar is up when the US economy is down

Stock futures have extended their drops and the safe-haven dollar has come in demand.

Why are weak US figures good for the dollar? The greenback is the world's reserve currency and traders flock into it in times of trouble. Moreover, when the world's largest economy takes a hit, others suffer more.

More specifically for retail sales – lower US consumption weighs on those exporting to America, from Korean smartphones to German cars and everything in-between.

These trends are set to continue. Weekly jobless claims are awaited on Thursday and the Federal Reserve's Beige Book is due beforehand. It may also be gloomy and thus dollar-positive.

See Beige Book Preview: Back to the future in March

Author

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

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