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US Retail Sales Fade, Inflation Highest in Five years as Markets Await Fed Rate Hike

Posted by Joseph Trevisani on Mar 15, 2017 1:38:57 PM

U.S. retail sales faltered in February registering the  smallest gain in six months, though consumer confidence  and job growth remain strong, while inflation rose to its highest annual rate in almost five years, all as the Federal Reserve has indicated that it will initiate a rate hike cycle at today's meeting. 

Purchases rose 0.1 percent, as expected, following January's revised 0.6 percent increase, originally issued at 0.4 percent, according to the Commerce Department on Wednesday.  Sales in the control group category, the consumption figures that are incorporated into gross national product, missed the 0.2 percent expectation, rising 0.1 percent after January's 0.4 percent increase. 

The consumer price index  rose 0.2 percent in February, matching the median prediction and down slightly from the 0.3 percent gain the prior month. Annual inflation jumped to 2.7 percent, as forecast, from 2.5 percent in January. That is the highest headline inflation rate since April 2012. Yearly core inflation, excluding food and energy costs dropped 0.1 percent to 2.2 percent.

The Federal Reserve concludes its two day meeting this afternoon at 2:00 pm and is expected to raise its benchmark Fed Funds rate 25 basis points to 1.0 percent.  If it does it will only be the third 0.25 percent increase since the end of the recession in June 2009.  

The Fed hiked once in December 2015 and once in December 2016, though it had originally posited four hikes last year.

 Fed members, including Chair Yellen have been nearly unanimous in support of an increase at today's FOMC meeting despite fading  economic growth.

The Atlanta Fed's GDPNow estimate for the first quarter was cut to 0.9 percent annualized today from 1.2 percent on March 8th.  It has fallen sharply from 2.5 percent in the past month.

Joseph Trevisani

Chief Market Strategist

WorldWideMarkets

Charts: FX Street, Atlanta Federal Reserve

cpi yoy march 15.png

 gdp now march 15.png

 

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