U.S. July Retail Sales: Surprisingly Strong, Easing Economic Concerns

Data Interpretation

Economic

Summary:

U.S. retail sales rose 1 percent MoM in July, the largest increase since February 2023, far exceeding market expectations of 0.3 percent. Core retail sales rose 0.4 percent MoM, also above expectations. The increase suggests that consumers remain resilient even in the face of high prices and rising borrowing costs.

On Thursday, August 15, the U.S. Census Bureau released retail sales data for July:

Retail sales in the U.S. soared 1% month-over-month in July 2024, following a downwardly revised 0.2% drop in June and way better than forecasts of a 0.3% gain.

Core retail sales came in at 0.4% MoM, compared to 0.1% expected and June's 0.5% (revised).

The strong rebound in retail sales, which rose more than expected in July on a monthly basis, the highest increase since February 2023, contrasts with the 0.2% decline in June. This broad-based growth demonstrates the resilience of consumers despite rising borrowing costs, a cooling labor market and an uncertain economic outlook.

By kind of business, 10 of the 13 kinds of business grew, mainly driven by motor vehicle & parts dealers. After a significant drop in sales due to a cyberattack on car dealers in June, the figure jumped 3.6 percent this month. Besides, electronics & appliance stores grew 1.6 percent, and building material & garden equipment & supplies dealers jumped 0.9 percent. Meanwhile, food & beverage stores gain 0.3% more thanks to the continuous trend of eating out.

While the slowdown in hiring triggered a brief but sharp market panic last week, strong retail sales data not only reflected continued consumer demand for a wide range of goods, but also showed the resilience of the U.S. economy. This will ease financial market fears of a sharp slowdown and dampen the bet on a 50-bps rate cut, because demand did not collapse. In addition, the FedWatch Tool showed a 74 percent chance of a 25-bps rate cut in September, up from 64 percent yesterday, while the likelihood of a 50-bps rate cut fell to 26 percent. Market confidence in the U.S. dollar increased after the data release, with the dollar index surging briefly, breaking above 103 and escaping from one-week lows. Furthermore, U.S. bond yields soared across the board. The 2-year bond yields which are sensitive to interest rate policy rose 14 basis points to 4.09 percent, and 10-year bond yields rose 10.3 basis points, showing that the market's optimism about the economic outlook has improved, and the "recession trade" receded.

U.S. July Retail Sales

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

Add to Favorites

FOREX.com

Political

Central Bank

Economic

The Week Ahead: Calendar

The Week Ahead: Key themes and events

•Jackson Hole Symposium

•FOMC minutes

•US Democratic National Convention (Aug 17-22)

•Flash PMIs

•Canada CPI

FOMC minutes (Wednesday 21 August)

This is one of those events that we need to keep on our radars, but in all likelihood we already know what the Fed think. Which is that the Fed will continue cutting rates in September, and continue in December through to next year. Besides, Jerome Powell will provide the Fed’s most up-to-date stance the next day, which leaves little in the way of surprise from the minutes.

US demographic convention (Saturday 17 – Thursday 22 August)

This is really just a box-ticking exercise for Kamala Harris to be officially nominated Kamala Harris as their Presidential nominee. But it is an important step none the less. It could give Kamala a bump in the polls, although some would be wise to remember that polls don’t always get it right.

Flash PMIs

Were it not for flash PMIs, there would be a real lack of traditional economic data points that matter for the week. Even so, Jerome Powell’s speech is likely to have a suppressive effect on volatility unless some real curve balls are thrown.

Traders should keep an eye US services inflation to see if it shows a further deceleration. A gradual deceleration keeps the soft-landing mantra alive, whereas weaker-than-expected numbers (such as headline, new orders, prices or employment) could prompt a bout of risk-off as traders price in yet more Fed cuts. Hotter figures from the UK make it more difficult for the BOE to cut, which is likely bullish for GBP/USD. Jackson Hole, FOMC Minutes, PMIs on Tap: The Week Ahead_2

Jackson Hole, FOMC Minutes, PMIs on Tap: The Week Ahead_2

Jerome Powell’s speech at the Jackson Hole Symposium (Friday 23 August)

The Jackson Hole symposium is an annual gathering of central bankers and economists from around the world. It is a forum for the Fed chair to discuss the state of the economy and the Fed's monetary policy plans.

Jerome Powell's speech at the Jackson Hole symposium in 2022 was a major policy announcement, in which he outlined the Federal Reserve's plans to combat inflation “forcefully and rapidly” and was committed to bringing inflation back down to its 2% target.

Last year Powell emphasised that the Fed were prepared to raise rates further if needed, citing uncertainties such as labour market dynamics, the neutral rate and the Russia-Ukraine war. He needn’t have, as the Fed had in fact just raised their rates for the last time of the cycle.

Jerome Powell delivers his latest Jackson Hole speech on Friday at 10:00 ET (15:00 GMT), which you can watch live on YouTube. Given the significance of the event, it could be treated like an FOMC meeting, which means volatility is likely to be very low leading into the event and trading activity grinds to a halt.

But it remains debatable as to whether he can really deliver a dovish surprise for traders, given the already-dovish market pricing. Fed fund futures imply four 25bp cuts are to arrive by January. So if there is to be a surprise at all, it could be that he’s not as dovish as traders want to hear. Jackson Hole, FOMC Minutes, PMIs on Tap: The Week Ahead_3

Jackson Hole, FOMC Minutes, PMIs on Tap: The Week Ahead_3

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Westpac

Central Bank

Economic

Recent events have not materially changed our view about the outlook for the Australian economy. Recent communication from the RBA has, however, changed our minds about how the RBA is seeing things and how it will respond to the data. While it is still possible that the RBA Board will change its mind, RBNZ-style, and pivot sooner than our current base-case expectation, we suspect that fast backflips are not in the RBA’s breakdancing repertoire.

Recall our earlier observation that the RBA had concluded that the labour market was tighter than it had previously thought, even though all bar one of the indicators in its labour market dashboard eased between May and August.

Deputy Governor Hauser’s speech earlier in the week addressed this to some extent. The upshot of the speech is that, because inflation has recently overshot the RBA’s earlier forecasts, it must be that demand is stronger than it thought, or supply is weaker, or a combination of the two. As Westpac Economics colleague Senior Economist Pat Bustamante and I noted earlier this week (PDF 427KB), though, the net surprise on the June quarter 2024 trimmed mean inflation forecasts since the RBA’s November forecast round was in fact roughly zero. In some respects, the RBA is seeking to explain the forecast miss for the September quarter 2023. We are now halfway through the September quarter 2024.

We are reminded of the famous quote from ice hockey legend Wayne Gretsky, to ‘skate to where the puck is going, not to where it has been’. Inferring a lower level of aggregate supply currently from a forecast miss that mainly happened a year ago feels a bit like skating to where the puck used to be quite a while ago.

Yesterday’s labour force results highlighted how quickly that puck can move. As Westpac Economics colleague Economist Ryan Wells reported, the labour force participation rate in July was the highest recorded in more than a century. This represents a significant boost to labour supply.

In addition, following up on a key point of Pat’s and my note, the re-benchmarking of quarterly hours worked reported in the July labour force release also works against the RBA’s thesis of weak productivity dragging on supply. Recall that the RBA revised down its forecast for year-ended productivity growth in the June quarter by a full percentage point between its May and August forecast rounds. As far as we can tell, this was largely because of an outsized reading for June quarter hours worked.

The re-benchmarking changed the story considerably. Growth in total hours worked was previously reported as 0.4% over the year to the June quarter (0.2% for non-farm hours, which is more relevant to the measure of productivity in the RBA forecasts). Each of the quarters in that year has been revised down at least a little. Hours worked are now reported to have been essentially flat compared with a year previously (and –0.2% for non-farm).

This 0.4 percentage point revision in hours worked over the year eliminates a considerable fraction of the rationale for the RBA’s downward revision to its forecast for productivity growth. Even a small upside surprise on June quarter GDP growth, or revisions to recent history, would close the gap further.

Flat hours worked in the face of a strong rise in the number of people participating in the workforce does look a lot like growth in labour supply outstripping labour demand and building up some spare capacity.

It is no surprise that labour supply has been so strong. With the cost of living having risen so much, people need the extra work to earn more money. A separate (and more lagged) ABS release, the Labour Accounts, shows that the share of people with a second job has risen to new highs. This is an example of what economists call an ‘income effect’, where labour supply rises when real hourly wages fall. It stands in contrast to the ‘substitution effect’ of people working more when their hourly wage rises, because working is then more attractive relative to leisure.

If strong labour supply does indeed reflect people seeking more income, we might also see unusual labour market dynamics as this effect unwinds. Normally when labour demand softens, we see some combination of higher unemployment and higher underemployment. Over recent decades, the underemployment adjustment has become stronger relative to that in unemployment. Employers are increasingly using the ‘hours margin’ to adjust their labour demand, rather than laying people off entirely. The RBA knows this, and indeed the key paper describing this effect was co-authored by the newly appointed head of the RBA’s Economic Analysis department.

If the income effect has been the dominant driver of the recent rise in labour supply, then as inflation subsides and real incomes recover, we may see an ongoing softening in hours worked, with neither unemployment nor underemployment rising very much. If people no longer need the extra hours or the second job, they will not report themselves as seeking more hours, and so underemployed.

The implication is that it will be all too easy to misinterpret an easing labour market as still tight. In principle, the RBA’s full employment checklist should help guard against such misinterpretation. But seeing how one quarterly outcome for hours worked seems to have changed the RBA’s view on supply capacity, and so the inflation outlook, it is hard to be confident of this.

The RBA will need to skate to where the labour market is going to go, not where it used to be.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Glendon

Economic

Bitcoin, the pioneering cryptocurrency, has captured global attention since its inception in 2009. As we move through 2024, various analysts and experts are making predictions about Bitcoin's price trajectory, fueled by significant events such as the recent halving and the approval of spot Bitcoin exchange-traded funds (ETFs). This article will explore the factors influencing Bitcoin's price, key predictions from notable figures, and the overall market sentiment as we head into the latter part of 2024.

The Current Landscape

As of mid-2024, Bitcoin has shown remarkable resilience and bullish momentum. Following its halving event in April 2024, which reduced the block reward from 6.25 BTC to 3.125 BTC, Bitcoin's price surged to a new all-time high of approximately $73,000. This increase was largely attributed to heightened institutional interest and the launch of spot Bitcoin ETFs, which have significantly boosted market confidence and liquidity.

Bitcoin's price history has been marked by extreme volatility, with significant fluctuations influenced by market sentiment, regulatory developments, and macroeconomic factors. The cryptocurrency reached its previous all-time high of nearly $69,000 in late 2021, only to experience a dramatic decline in 2022. However, the recent price movements suggest a potential recovery and renewed investor interest.

Key Predictions for 2024

Expert Insights

Several prominent figures in the financial and cryptocurrency sectors have made notable predictions regarding Bitcoin's price in 2024:

Max Keiser predicts that Bitcoin could reach $200,000 by the end of 2024, driven by increasing adoption and limited supply due to the halving event.

Chamath Palihapitiya, a well-known venture capitalist, has suggested that Bitcoin might hit $500,000 by October 2025, emphasizing its potential as a hedge against traditional financial systems.

Cathie Wood, CEO of Ark Invest, has a longer-term outlook, predicting Bitcoin could soar to $1.48 million by 2030, reflecting her belief in the cryptocurrency's transformative potential in the financial landscape.

Technical Analysis

According to various technical analyses, Bitcoin's price in 2024 is expected to fluctuate within a range. Some estimates suggest a minimum price of around $58,274 and a maximum of approximately $75,939, with an average trading price projected at $93,604.

Analysts also anticipate that Bitcoin could maintain an upward trajectory, particularly in the latter half of the year, as institutional adoption continues to grow and regulatory clarity improves.

Factors Influencing Bitcoin's Price

Institutional Adoption

The approval of spot Bitcoin ETFs has been a game-changer for the cryptocurrency market. These financial products have opened the door for institutional investors to gain exposure to Bitcoin, thus increasing demand and liquidity. Major companies like Tesla and MicroStrategy have already made significant investments in Bitcoin, further legitimizing it as a viable asset class.

Market Sentiment and Economic Conditions

Market sentiment plays a crucial role in Bitcoin's price movements. Positive news, such as regulatory approvals and increased adoption, tends to drive prices higher, while negative news can lead to sharp declines. Additionally, macroeconomic factors, including inflation rates and interest rates, can influence investor behavior and cryptocurrency valuations.

The Halving Effect

Bitcoin's halving events, which occur approximately every four years, are designed to reduce the rate at which new Bitcoins are created. This scarcity is a fundamental aspect of Bitcoin's value proposition, as it mimics precious metals like gold. The recent halving has already had a significant impact on prices, and experts believe that the effects will continue to be felt throughout 2024.

Conclusion

As we progress through 2024, Bitcoin's price predictions remain optimistic, with many experts forecasting substantial growth. The combination of institutional adoption, regulatory clarity, and the inherent scarcity of Bitcoin due to its halving events positions the cryptocurrency for potential new highs. However, investors should remain cautious, as the market is still subject to volatility and external economic factors.In summary, while predictions vary widely, the consensus suggests that Bitcoin could experience significant price appreciation in 2024, making it an intriguing asset for both seasoned investors and newcomers to the cryptocurrency space.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

FastBull Featured

Daily News

Economic

Central Bank

Political

[Quick Facts]

1. RBA Governor Bullock says It's premature to think about rate cuts.

2. U.S. homebuilder sentiment drops for fourth straight month.

3. Musalem says risks are more balanced, time to cut rates approaching.

4. U.S. retail sales rise more than expected in July.

5. U.S. initial jobless claims drop for second straight week.

6. New round of Gaza ceasefire talks start in Qatar.

[News Details]

RBA Governor Bullock says It's premature to think about rate cuts

Australia's central bank remains some way off easing monetary policy as inflation is proving persistent and will only return back to the target range late next year, said Reserve Bank of Australia (RBA) Governor Michele Bullock on Friday. The board remains vigilant to upside risks to inflation, and it is premature to be thinking about rate cuts.

A week ago, the RBA kept its key interest rate at a 12-year high of 4.35% and maintained its hawkish rhetoric. "Circumstances may change, of course, and the outlook is uncertain," Bullock told lawmakers. "But based on what the board knows at present, it does not expect that it will be in a position to cut rates in the near term." The next RBA meeting will be held on September 23 to 24 when the central bank is expected to hold rates steady for the seventh consecutive meeting.

U.S. homebuilder sentiment drops for fourth straight month

Confidence among U.S. home builders slipped for the fourth straight month to its lowest point of the year in August as high loan rates and home prices weigh on companies and buyers alike. Data shows that the builder confidence fell 2 points to 39 in August from a revised figure of 41 in July. Economists surveyed had expected a median reading of 43. The data indicated a pessimistic view of the current situation but a more optimistic outlook for the future. Prospective buyer traffic and current sales conditions indicators both fell to new lows of the year, while a measure of sales expectations for the next six months rose 1 point to 49.

NAHB Chief Economist Robert Dietz said this may reflect expectations that mortgage rates are bound to fall. Given that current inflation data points to a Fed rate cut and that mortgage rates fell significantly in the second week of August, buyer interest and builder confidence should improve in the coming months.

Musalem says risks are more balanced, time to cut rates approaching

While inflation in services and housing remains somewhat stubborn, recent data has bolstered confidence in inflation easing, said St. Louis Fed President Alberto Musalem on Thursday. The labor market, with clear signs of cooling, is no longer overheated, though layoffs remain low. The job market no longer poses an upward risk to inflation. Economic growth is strong, and data does not support the view of a recession. It is expected that the GDP growth rate in the second half of the year will be between 1.5% and 2%. Musalem believes the time to cut rates is approaching as the risks facing the dual mandate appear more balanced.

U.S. retail sales rise more than expected in July

Retail sales rose 1% month-over-month to $709.7 billion in July, data from the U.S. Commerce Department showed Thursday. It's a strong pickup from June that helped alleviate concerns about a sharp economic slowdown. Sales increased across various sectors, including motor vehicle and parts dealers, electronics and appliance stores, and food and beverage outlets. The strong demand might lead financial markets to lower expectations for a 50bp rate cut next month, though a 25bp cut remains likely.

U.S. initial jobless claims drop for second straight week

U.S. initial jobless claims for the week ended August 10 came in at 227,000, below the expected 235,000 and the revised figure of 234,000 for the previous week, according to data released by the U.S. Department of Labor on Thursday. Despite a recent slowdown in hiring, initial jobless claims have decreased for the second consecutive week, reaching their lowest level since early July. This strengthens the view that July's nonfarm payrolls report might have been negatively impacted by hurricanes, suggesting that the labor market remains resilient. Additionally, continuing jobless claims for the week ended August 3 fell to 1.86 million.

New round of Gaza ceasefire talks start in Qatar

A new round of Gaza cease-fire talks got underway in the Qatari capital Doha on Thursday afternoon, an official briefed on the meeting said, adding that Israel's intelligence chief participated in the closed-door meeting along with his U.S. and Egyptian counterparts and the Qatari prime minister. The talks are aimed at ending 10 months of fighting in the Palestinian enclave and bringing home 115 Israeli and foreign hostages.

Iran threatened to retaliate against Israel after the July 31 assassination of Hamas leader Haniyeh in Tehran. With U.S. warships, submarines and warplanes sent to the region to defend Israel and deter potential attackers, Washington hopes the Gaza cease-fire will defuse the risk of a full-blown regional conflict. Hamas officials who accuse Israel of delaying did not attend Thursday's talks. However, officials with knowledge of the talks said the mediators planned to consult with the Doha-based Hamas negotiating team after the meeting.

[Today's Focus]

UTC+8 20:30 U.S. Building Permits Prelim MoM (Jul)

UTC+8 22:00 U.S. UMich Consumer Confidence Index Prelim (Aug)

UTC+8 01:25 Next Day: Chicago Fed President Goolsbee Participates in a Fireside Chat

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

WELLS FARGO

Economic

They Might Be Choosy, But Consumers Are Still Spending

Retailers increased sales more than twice as fast as the consensus had estimated in July. That is true whether describing headline retail sales (+1.0% vs. 0.4% expectation) or the measure that excludes autos and gas (+0.4% vs. 0.2% expectation). Perhaps the most remarkable development though is that control group sales, a favored tool for predicting PCE spending in the GDP report, increased 0.3% in July. Coming on the heels of a 0.9% gain in the prior month, the upshot is more solid goods spending than most forecasters, ourselves included, had expected.

Retail Sales Is Counterprogramming the Job Report_1

Less than two weeks ago, broad-based weakness in the July jobs report sent global financial markets into a tailspin and re-ignited fears of U.S. recession. In our August forecast update, we described how despite it being somewhat counter-intuitive, recent consumer spending numbers have come in stronger even as labor market indicators have come in weaker. Today’s retail sales report is the latest development on this theme. That spending momentum in July positions spending for a solid third quarter.

Prior to this release we had already been expecting a decent outturn for Q3 spending and forecast total real PCE was set to rise at a 2.3% annualized clip in Q3, essentially matching the Q2 pace. Sales leaped $7 billion in July, which equates to about a quarter of the gain we’ve seen over the past two years for retail in a single month. To say July sales popped is somewhat of an understatement, and it easily sets us up for stronger growth in Q3 than we had been anticipating previously even with some potential payback in August.

As was widely expected, the place where sales picked up the most was the largest category: auto dealers. A slump in June set up July for a solid gain of 3.6%. This is made somewhat more impressive by the fact that the CPI report showed auto prices are actually down over the past year. Some old familiar friends have returned to auto dealerships to help move inventory including more attractive financing terms, manufacturer rebates and dealer incentives.

Elsewhere, stores reported broad-based gains across most store types. The only categories that were down were clothing, sporting goods and miscellaneous. If one were to judge only from consumer company earning announcements, little of this makes sense.

The CEO of a major retailer in the building materials and garden equipment space earlier this week noted a “deferral mindset” among their shoppers. While a leading general merchandise retailer today described shoppers at their stores as being “discerning, choiceful, value-seeking.”

Labor market data have grown in importance as the Fed has shifted its focus back to the jobs market, and by extension the health of the consumer matters. Even though inflation and employment are the sole mandates, the Fed cannot afford to look past consumer behavior.

We’ve long held the view that continued consumer resilience depends on income growth as savings are no longer in excess and access to affordable credit has dwindled. With retail sales having held up through July, it somewhat walks back the urgency for an aggressive Fed pivot. Yet retail sales are limited in their growth signal as they mostly cover goods consumption and are subject to large monthly revisions. The more comprehensive personal income and spending report out later this month will be key to gauging consumer resilience, but the July retail report was a positive economic development. It’s the latest reminder that its tough to bet against the US consumer. Retail Sales Is Counterprogramming the Job Report_2

Retail Sales Is Counterprogramming the Job Report_2

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

FxPro

Cryptocurrency

Market Picture

The cryptocurrency market retreated 2.9% over the past 24 hours to $2.08 trillion from levels near $2.15 trillion, which had been resistance for the past ten days. Despite moderate optimism in equities following the inflation data, cryptocurrencies failed to find sufficient demand. The negative performance of cryptocurrencies could herald another round of outflows from risk assets, especially ahead of the weekend.

Bitcoin fell to $58K, a loss of 4.5% in 24 hours. The sell-off started with the crossing of the 50- and 200-day moving averages. According to statistics, when a ‘death cross’ is formed, it takes an average of one month to recover to the starting point.

Ethereum, which rolled back to $2620, experienced a similar drop. The rally lost momentum near the 61.8% level of the initial decline, creating the risk of another $500 pullback.

News Background

Cointelegraph writes that Solana’s (SOL) rise to $190 looks more realistic than $300-1000 due to competition from L2 for Ethereum and the risks of waning hype around meme coins. The journalists called SOL overvalued compared to L2 tokens for Ethereum.

Former employees of the TON Foundation have set up a venture capital firm, TON Ventures, and raised an initial investment of $40 million. The project will support startups on The Open Network (TON). The TON cryptocurrency hit new highs in more than three weeks, climbing above $7 intraday.

Rising stablecoin issuance could be the key to Bitcoin’s continued rally, according to 10x Research. The issuers of the largest stablecoins, Tether and Circle, issued nearly $2.8 billion worth of assets last week, indicating that some institutional investors are injecting fresh capital into the crypto market.

According to SEC filings, investment bank Goldman Sachs and trading firm DRW Holdings own crypto ETFs worth $418.7 million and $238.6 million, respectively.

According to Growthepie, the daily number of transactions in Ethereum-based Layer 2 (L2) solutions has reached a record 12.5 million, up more than 140% since the beginning of the year. The Coinbase-backed Base blockchain has largely driven the growth. At the same time, the number of active addresses in the L2 segment began to decline, peaking in mid-July.

According to Token Terminal, BlackRock is preparing to launch its blockchain, which will be an analogue of Coinbase’s L2 network.

Risk Warnings and Disclaimers

Add to Favorites