|

US retail sales impress, but June unimpressive, net, point to less growth in PCE - Nomura

After today's key US data, analysts at Nomura offered a review of retail sales and updated their GDP tracking update.

Key Quotes:

"Retail sales rose 0.5% m-o-m, in line with our and the market's expectations in June, with positive revisions to May figures. The gain in June was driven by solid gains in sales at "non-core" stores (i.e., auto and parts dealerships, gasoline stations, building material stores and food services). 

Sales at autos and parts dealerships, which account for the lion’s share of total retail sales, increased solidly at 0.9% m-o-m in June following a 0.8% gain in May. These gains point to healthy consumer demand for autos during Q2 after weakness in Q1. Gasoline stations saw a 1.0% sales increase, boosting total retail sales. Further, sales in the food and beverage service sector increased 1.5% in June after a 2.6% jump in May.

Excluding these components, core retail sales were flat in June with mixed details following upwardly revised 0.8% m-o-m growth in May (previously reported as +0.5%), implying less momentum at end-Q2. Department store sales fell 1.8% and electronics and appliance store sales fell 0.4%. Clothing stores saw a sharp 2.5% m-o-m decline in sales. On the other hand, receipts at health and personal care stores were unusually strong, up 2.2% m-o-m, and non-store retailers sales rose a solid 1.3% (most of which likely came from e-commerce).

The flat reading in core retail sales in June does not change our view that the growth in personal consumption expenditure (PCE) likely picked up robustly in Q2 with a solid contribution to real GDP growth after some softness in Q1. We remain optimistic on the near-term PCE outlook as the continued strength in the labor market will likely remain supportive for PCE growth and month-to-month changes in retail sales can be volatile. However, weaker-than-expected sales in June after stronger gains in previous months point to possible moderation in Q3 after acceleration in Q2. 

GDP tracking update: While upward revisions to May core retail sales suggest more momentum in real PCE growth in mid-quarter, data for June were weaker than our expectation. On net, the incoming data point to modestly less growth in PCE in Q2. After rounding, however, our Q2 real GDP tracking estimate remains unchanged at 4.8% q-oq saar."

Author

Ross J Burland

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

More from Ross J Burland
Share:

Editor's Picks

AUD/USD consolidates above 0.7000; remains close to monthly top

AUD/USD holds steady above 0.7000 during the Asian session on Friday, trading just below the previous day's monthly low amid diverging forces. A hawkish RBA continues to support the Aussie, while the recent decline in US bond yields keeps the US Dollar depressed near a three-week low. However, oil-driven inflation fears reinforce Fed hike bets, which, along with geopolitical risks, could benefit the safe-haven buck and cap the currency pair.

USD/JPY bounces off one-month low; climbs to 157.00 amid reviving USD demand

USD/JPY rebounds from the 156.00 neighborhood, or a one-month low touched during Friday’s Asian session, with bulls looking to extend momentum beyond 157.00 amid the emergence of some US Dollar buying. Meanwhile, Japan's National CPI rose to a nine-month peak and reaffirmed BoJ rate-hike bets, which could support the Japanese Yen and cap gains for the currency pair.

Gold treads water around $4,000

Gold prices maintain its offered stance in place at the end of the week, hovering around the key $4,000 threshold per troy ounce. The persistent selling bias in the precious metal comes amid decent gains in the US Dollar and an acceptable rebound in US Treasury yields across the curve, all alongside further upside traction in crude oil prices.

Crypto Today: Bitcoin holds the 50-day EMA as Ethereum and XRP face structural resistance

Bitcoin gradually ticks up on Friday, trading above $81,000. The Crypto King has recently defended structural support near $80,000, reinforcing the prevailing bullish outlook. Ethereum similarly edges higher above $2,400, while Ripple trades above $1.32 after testing support around $1.30.

The French bond panic is overdone. Here's what the market is misreading 

France's 10-year government bond yield has climbed above 5%, reigniting fears of a sovereign debt crisis in the Eurozone. With public debt exceeding €3.5 trillion, persistent budget deficits and a fragmented political landscape, investors are increasingly questioning the French government's ability to stabilize its finances.

What November 3 means for the Fed's rate path and the US Dollar

The USD faces a decisive period ahead of the November 3 midterm elections. While markets anticipate another interest rate increase from the Fed in December, the battle for control of Congress could reshape fiscal policy expectations and, indirectly, the path of US monetary policy in 2027.