US DATA
The August retail sales report came in remarkably in-line with expectations considering recent volatility in the data. A headline beat and a slight upward revision to prior data mean the report was on the slightly strong side of consensus, overall it should do little to persuade or dissuade the Fed from cutting either 25bp or 50bp on Wednesday.
- Headline retail sales printed 0.1% M/M (vs -0.2% expected, 1.1% prior rev up 0.1pp), with ex-auto and ex-auto/gas missing expectations by 0.1% (0.2% and 0.3% respectively, 0.4% prior for each unrevised). Control Group sales, which are closely eyed as an input to GDP, came in line with expectations at 0.3% (0.4% prior rev up 0.1pp).
- In the most closely eyed category, auto sales had been expected to pull back sharply vs July's idiosyncratic gain (4.4% M/M, a rebound from a cyberattack-hit sector in July), and indeed came in at -0.1%. Elsewhere, leading overall gains were non-store retailers (eg online), up 1.4% M/M; of the 6 biggest categories by sales, the other 5 were flat/negative (food services/drinking places, food and beverage, gasoline, general merchandise - see chart).
- Looking at the bigger picture, retail sales momentum is rebounding in nominal terms despite deflationary goods prices, with Control Group 3M/3M annualized gains (a proxy for the quarterly pace used in GDP) is rising at a 5.7% clip, the fastest since August 2023 and well up from sub-2% readings in Q1.
- An unambiguously weak report could have nudged 50bp cut pricing a little further along as it was seen as a possible tie-breaker for the Committee's decision on Wednesday - if anything the solid pickup in core momentum argues for a more measured approach.
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