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May retail sales lower than expected, April data revised down sharply
May retail sales rise slightly +0.1% MoM (< estimate +0.3%), from April data revised sharply down from 0% to -0.2% m/m.
Core retail sales decline -0.1% MoM (< expected +0.2%).
May real retail sales (inflation-adjusted) also at +0.16% from sharply revised April data down to -0.58% m/m.
Compared to last year, retail sales up +2% YoY, however if factoring in rising inflation impact, real sales decline -1.18 YoY.
Biggest declining category is gasoline - due to sharp drop in gasoline prices.
E-commerce growth also gradually returning to normal levels, after surging during Covid period.
Control group (used in GDP calculation) up +0.4% MoM (as expected),
…however this +0.4% increase is based on lower revised prior month data down to only -0.5% m/m (lowest since March 2023).
Control group: sales excluding revenue from auto dealers, building materials stores, gas stations, stationery stores, and tobacco shops.
…used to more accurately measure consumer spending.
Market reaction:
Retail data is bad news for consumers but good news for investors.
The market still expects the first cut to take place in September.
USD 13 billion 20Y bond auction successful: strong demand surge
High Yield: 4.452% (market yield: 4.480% | previous session: 4.635%)
→ Stop-through: 2.8 bps.
Success rate of bids at High Yield: 97.08% (previous session: 30.2%)
Bid-to-Cover: 2.74 (previous session: 2.51)
Breakdown of competitive awards:
Dealers: 5.76% (previous session: 10.06% )
Indirect bidders: 77.9% (previous session 70.76%)
However, currently the Fed is still issuing more T-Bills (short-term debt under 1 year) than these long-term bonds.
Statements from Fed officials
Richmond Barkin
Inflation is trending down: This month's inflation is quite stable.
The labor market is heading in the right direction and has also cooled.
Not yet confident in Q1/2024 inflation data, need to monitor more new data.
Fed New York Williams
The economy is gradually rebalancing, inflation is on the right track.
Inflation data is trending positively.
Interest rates will fall in the next few years.
Fed Philadelphia Harker
One rate cut this year is reasonable.
Expect inflation to cool down, however, more data is needed to decide.
Housing prices and service prices remain concerns.
Recently, BofA also said that the Fed may not cut rates until housing prices cool.
May industrial production unexpectedly surges
May industrial production surges +0.9% MoM (> +0.3% estimate & 0% previous) - largest increase since January 2023.
→ Positive sign for manufacturing sector growth momentum.
The strong upward momentum mainly comes from the industrial production index group: +0.9% MoM.
Of which, consumer goods production increased +1.3% MoM.
Capacity utilization also increased 78.7% - better than expected.
Crypto market: Telecom giant steps into Bitcoin mining.
T-Mobile's parent company, Deutsche Telekom, begins planning to mine Bitcoin.
Some other news:
Apple discontinues Apple Pay Later service (buy now, pay later) in the US, after launching it early last year.
Elon Musk plans new payment channel on X.
Users can transact financially like Venmo: store money, pay, and shop in stores.
Biden expected to announce bill allowing undocumented immigrants married to US citizens to apply for legal residency.
Warren Buffett buys Occidental Petroleum shares for 9 consecutive sessions, increasing ownership ratio to nearly 29% (~255 million shares).
Bank of Japan (BOJ) Governor signals rate hike in July depending on economic data, alongside plans to reduce QE also in July.
What Are the Threats to the US Economy and the Dollar's Position?
Last week's CPI data shows inflation continuing to decline as market expected, why did the FED lower the number of rate cuts and raise inflation forecast for this year?
Employment data continues to be stable, why does Powell feel worried about the economy in 2025?
Saudi Arabia may end the agreement to sell oil only in Dollars, is this the event marking the end of the Dollar's position?
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