A look at the changing dynamics of US data
In a short while we get the latest US retail sale data July and I just want to highlight how the focus on data can change.
When the Fed was tightening, the strength of a the consumer was a big factor. A strong consumer leads to a strong economy and gives the Fed comfort that folks can wear rate hikes. Now the situation has changed. The Fed now needs to see whether rate hikes start biting on the consumer leading to a slowdown in spending, and thus the economy. Central banks are always fighting two sides of the tightening/easing scale and balancing monetary policy.
In timescale terms, the Fed’s hikes have come fairly quickly so we may not yet have seen any follow through effects. That might lead them to a level of complacency. But. the signs of tightening are starting to show (take the dropping refinancing index in the MBA data). If these small signs start adding up, it will become something big enough for the market to take notice of and then it will start questioning the Fed’s path.
That’s a broad look at things and in the short-term, we’ll take the data on its merits today.
We’re expecting;
- Sales at 0.1% vs 0.5% prior m/m
- Ex-autos 0.3% vs 0.4% prior m/m
- Ex-gas was 0.3% prior m/m
- Core sales (control group) 0.4% exp vs 0.0% prior m/m
Other data out is Empire manufacturing for August (20.0 exp vs 22.6 prior), Q2 non-farm productivity (2.4% exp vs 0.4% prior) and Q2 Unit labour costs (0.0% exp vs 2.9% prior).
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