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US Retail Sales Miss Forecast, Euro, Bonds Soar

Posted by Joseph Trevisani on Apr 14, 2015 1:32:00 PM

Retail sales rebounded in March from three straight months of contraction but the gains were smaller than anticipated hinting that consumers remain wary and unwilling to extend themselves. 

Overall purchases rose 0.9 percent, the biggest jump in a year, after a revised 0.5 percent drop in February and declines of 0.8 percent in January and 0.9 percent in December, according to the Commerce Department today. Economists had forecast a 1.1 percent gain. 

The sales figures mirror recent credit card and saving rate information which show consumers reducing card balances in three of the four months to February and raising their saving pace to 5.8 percent, its highest portion of disposable income in more than two years. 

Despite the shift in available income brought about by the 35 percent drop in gasoline prices since last summer and the relatively strong job creation until March, the American consumer has focused on repairing the household balance sheet rather than assuming new debt or splurging at the mall.

Stagnant wage growth is the likely culprit for the abundance of consumer caution.

Annual hourly earnings were 2.1 percent higher in March, only marginally above the 2.0 percent average over the six years since the end of the recession in June 2009, and barely ahead of the 1.7 percent inflation rate for the period.

The euro surged against the dollar on the release, moving from 1.0561 minutes prior to 1.0692 within three quarters of an hour and topping at 1.0707, the highest for the united currency since last Thursday. As of 1:40 pm the euro was trading at 1.0666.

Bonds saw some of their strongest gains in two weeks. The 10-year yield fell 5 basis points to 1.87 percent and the 2-year shed 3 points to 0.50 percent. 

Retail sales excluding automobiles rose 0.4 percent in March, about half the 0.7 percent forecast and the prior month was adjusted to flat from -0.1 percent.

Sales minus automobiles and gasoline gained 0.5 percent on the month, missing the 0.6 percent estimate and the February result was revised to -0.3 percent from -0.2 percent. 

In yet another statistic pointing to a first quarter GDP considerably less than the 2.2 percent annualized rate of the fourth quarter, the 'retail sales control group' which is used in the  consumption portion of the GDP calculation, rose 0.3 percent in March, fading the 0.5 percent forecast.

The February ‘control group’ result was revised down to -0.23 percent from flat. With January's -0.19 percent figure, two of three  first quarter months are negative, raising the possibility that first quarter GDP could be negative, as it was in 2014 at -2.1 percent. 

The initial first quarter GDP figures will be issued on April 29th. 

 

Joseph Trevisani

Chief Market Strategist

WorldWideMarkets Online Trading

Charts: Bloomberg

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sales rg april 14

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