Retail sales data monthly (monthly) is an important economic indicator that directly affects financial markets in several ways:
Economic Growth Index: Retail sales reflect patterns of consumer spending, which make up a large part of overall economic activity. A higher-than-expected increase in retail sales indicates strong consumer confidence and spending, which could spur economic growth. Conversely, a decline may indicate an economic slowdown or consumer caution.
Interest Rates and Monetary Policy: Central banks closely monitor retail sales data as part of their assessment of economic health. Strong retail sales figures could influence central banks to consider tightening monetary policy (raising interest rates) to curb potential inflation resulting from increased consumer spending. Conversely, weak retail sales may prompt central banks to consider policy easing (lowering interest rates) to stimulate economic activity.
Sector performance: Various sectors within the economy, such as consumer goods, retail, and entertainment industries, are directly affected by retail sales trends. Strong retail sales can increase the revenue of companies in these sectors, which can lead to an increase in their share prices. Conversely, disappointing retail sales can affect the performance of the sector.
Market Sentiment and Investor Confidence: Retail sales data provides insights into consumer sentiment and economic conditions. Positive retail sales figures generally boost investor confidence in economic growth prospects, leading to higher market sentiment and the likelihood of higher stock prices. Conversely, weaker-than-expected retail sales can weaken investor confidence and lead to market volatility or declines.
In general, retail sales data on a monthly basis is closely monitored by economists, investors, and policymakers alike due to their direct effects on economic growth, monetary policy decisions, sector performance, market sentiment, and currency strength.
Key factors and impacts on consumer and retail spending
When analyzing the trend in retail sales data over the past few quarters, it is important to consider several factors that can provide insight into the underlying dynamics of consumer and retail spending. Here are some key factors to consider:
Percentage change: Look at the percentage change in core retail sales per month during each quarter. Determine whether there is steady growth, decline, or fluctuations in sales. Pay attention to the size of the changes to understand the strength of the trend.
Economic conditions: The study of broader economic conditions during the analyzed period. Factors such as GDP growth, employment levels, wages, inflation, and consumer confidence can influence consumer spending patterns, and therefore core retail sales monthly. Assess the alignment of economic factors with the trend in retail sales to understand the relationship between overall economic health and consumer spending.
Consumer sentiment: Consumer sentiment plays a crucial role in driving retail sales. Monitor consumer confidence indicators or surveys that measure consumer sentiment. Look for correlations between changes in consumer sentiment and trend in month/month core retail sales. Positive emotions often lead to increased consumer spending, while negative emotions can have the opposite effect.
Industry-specific factors: Different industries in the retail sector may face different trends. Analyze sales data for specific retail categories, such as clothing, electronics, furniture, or automobiles, to identify any sector-specific factors that affect core retail sales.
External events: Major external events, such as natural disasters, geopolitical developments, or pandemics, can significantly affect consumer behavior and retail sales. Consider any observed events that occurred during the analyzed period and evaluate their potential impact on core retail sales monthly.
By looking at these factors, you can gain a more comprehensive and accurate understanding of the trend in core retail sales over the past few quarters and the factors that led to the observed changes.
US economic indicators point to a shift in market sentiment and currency dynamics
Slower job growth in the US, a third consecutive rise in unemployment, and a weaker-than-expected consumer price index are a turning point. Although the Fed will not cut interest rates when it meets at the end of the month, President Powell is likely to lay the groundwork for a rate cut in September. In fact, the Fed’s money futures market has priced just over a 25 basis point cut. Deteriorating economic conditions have sent US two-year and ten-year bond yields to their lowest levels in nearly three months.
This has affected the dollar and reinforced the feeling of an important peak for the dollar. This contrast to better-than-expected GDP in May United Kingdom helped lift sterling to new highs for the year near $1.30, while low U.S. interest rates and speculation of Japanese intervention dragged the greenback from around 161.75 yen to just under 157.40 yen.
The euro rose above $1.09 at the end of last week. The U.S. dollar weakened support near C$1.3600 but recovered quickly despite remaining capped near C$1.3650..
Next week is marked by U.S. retail sales, which are likely to reflect weaker consumer demand, and manufacturing output may have fallen for a second time in three months in June. A review of Japan Bank’s balances will highlight whether it intervened, but the official report will not be due until the end of the month. Early indications seem to confirm that there has already been a modest intervention.
Similarly, Canada’s stronger-than-expected CPI may nullify growing speculation of a rate cut at its July 24 meeting. The swap market has a slightly over 80% chance of reducing the interest rate.
