After three months “horrible data” again in negative value

At 20:30 on Tuesday, the U.S. monthly retail sales rate for May was released, recording -1.3%, worse than expected at -0.7% and negative again after three months, but the previous value was revised up to 0.9%. The monthly core retail sales rate was recorded at -0.7%, also worse than expected.

After the release of the data, spot gold and silver, the dollar index temporarily fluctuate little, the U.S. 10-year Treasury yield rose from 1.487% to 1.501%.

Why did the “horrible data” slide?

Bank of America’s “divine prediction” once again fulfilled, it is expected that the overall monthly retail sales rate will fall 1.4%, excluding the monthly rate of retail sales of cars and gasoline fell 1.0%.

Scotiabank noted that auto sales dragged down the U.S. retail sales data recorded a decline.

“U.S. new car sales plunged 8.2% in May due to a chip shortage, and CPI data also showed a 1.6% increase in auto prices last month. And auto sales account for about 20 percent of total retail sales.”

But sales figures excluding autos also did not record an increase as expected, and it appears that even with the reopening, sales in other sectors do not appear to be more resilient.

Greg Michalowski, forexlive analyst, commented that overall retail sales met our expectations at the time, and there were still bright spots in last month’s revised data. The data did show a decline after two fairly strong months in March and April. The data may indicate that consumers are shifting their spending more from buying goods to services such as travel and entertainment as hotels reopen and people want to get out and about.

Agencies have also commented that more than half of U.S. adults are now fully vaccinated, driving demand for activities such as air travel, hotel stays, dining out and entertainment. Vaccinations, the government’s trillion dollar stimulus and record low interest rates are all fueling demand.

Markets await Fed statement

More than five minutes after the release of the data, analyst Chris Anstey pointed out that the market reaction is still not too big, traders seem to take the data performance lightly, is waiting for the Fed’s statement tomorrow. In any case, retail sales data will undoubtedly be one of the key economic indicators of concern to the Fed, given that the data fell more than expected, which may ease inflation concerns and the urgency of the Fed’s shift in policy direction.

Bank of America economists Michelle Meyer and Joseph Song pointed out in an analysis report after the May employment report, the employment report means that the Fed will continue to move in the ultimate direction of quantitative easing exit at a prudent and tiny pace, that is, to start discussing the bond purchase program, although there is still a long way to go before the real exit.

The Fed may discuss when and how to exit the $120 billion per month bond purchase program that began in 2020 at its regular meeting in June. However, it is expected that the Fed will not make any decision before the annual meeting of the Jackson Hole global central bank in August, and will not change the size of the bond purchases until 2022.