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The US retail sales report for January showed a rebound, compared to December’s negative numbers that were revised lower. Analysts at CIBC, point out that today’s figures imply that consumption will moderate significantly from its Q4 pace in Q1. They see however that healthy labor market gains will help support consumption.

Key Quotes:  

“What went down in December did come back up again in January, just not far enough. Americans returned to shopping malls in January, but downwards revisions to the December retail sales figures leave sales in the control group, which feeds more directly into GDP, showing a poor three-month trend. While the resolution of the government shutdown at the end of January will likely help sales rebound further over the rest of Q1, household spending appears poised to grow only modestly in Q1.”

“Headline retail sales advanced by 0.2% in January, with a decline in gas receipts and auto sales weighing on that figure. The control group which excludes restaurants, gasoline, building materials, and autos saw a decent gain of 1.1%, but that came on the back of a negatively revised December reading (now -2.3% vs. -1.7% prev.). That leaves the three-month average annualized pace of core sales at -0.5%, the first negative reading seen since 2013.”

“This report is another indication that the Fed will take an extended pause in 2019 before raising rates once later in the year.”

“The positive surprises in the January figures were offset by negative surprises in December readings, limiting market reaction.”