- US Retail Sales have dropped by 1.3% in May, more than expected.
- Producer prices have advanced to a record, but core PPI only meets expectations.
- The Empire State Manufacturing Index also dropped off the highs.
Will the Federal Reserve hint at tapering its bond-buying scheme? That remains the questions on investors' minds, as the countdown continues. Fed officials and investors have received one last set of figures to chew on ahead of the announcement on Wednesday, and the verdict is far from painting a picture of overheating.
1) Curbed consumption: Retail Sales missed with a drop of 1.3% in May, more than erasing April's upward-revised 0.9% increase. The Retail Control Group – aka "core of the core" – squeezed by 0.7%, the second consecutive month of falls. Consumption is central to the world's largest economy, and shoppers seemed to have curbed their stimulus-induced shopping.
2) Tamer inflation? The Producer Price Index (PPI) jumped to 6.6% YoY, above expectations and adding to the picture of rising inflation. Nevertheless, the bank is set to argue that such price rises are only "transitory" – a combination of base effects and price hikes related to the reopening. Moreover, Core PPI only met expectations with 4.8% YoY, seemingly the first inflation figure that economists did not underestimate.
3) The future is only OK: The Fed's own Empire State Manufacturing Index dropped from 24.3 to 17.4 points in June, missing expectations. This forward-looking gauge also included a slide in the prices component. That also may take the sting out of the few inflation hawks on the Fed's committee.
The US dollar has advanced in response to the data bulk, seemingly focused on robust PPI. However, investors may have a rethink after the dust settles and reposition themselves ahead of decision day.
See Federal Reserve Preview: First up, then down? Playbook for trading the Fed
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