May Retail Sales Increase by 0.1% MoM
Below Forecast (0.4%) and April (-0.2%) Figures
US Treasury Yields Decline
U.S. retail sales increased last month at a slower pace than expected. It appears that Americans' finances are under pressure due to high inflation and high interest rates. Following the recent easing of inflationary pressures, retail sales also fell short of forecasts, leading to analyses that the U.S. economy is slowing down.
According to the U.S. Department of Commerce on the 18th (local time), May retail sales rose by 0.1% compared to the previous month. Consumption increased at a pace below market expectations (0.3%). The growth rate was higher than April's figure (-0.2%). The April retail sales growth rate was revised downward from 0% to -0.2%.
Retail sales excluding automobiles and gasoline increased by 0.1%. Although this was lower than experts' expectations (0.4%), it was higher than April's decline of 0.3%.
Among the 13 categories of retail sales, five showed a downward trend. Consumption decreased in gas stations (-2.2%), furniture (-1.1%), building materials, garden equipment, and supplies dealers (-0.8%), and restaurants and bars (-0.4%). On the other hand, consumption increased in sporting goods, music, and bookstores (2.8%), automobile and parts dealers (0.8%), and e-commerce (0.8%).
The retail sales indicator is considered a pillar accounting for two-thirds of the U.S. real economy and is used to assess the overall economic trend. Last month's slower-than-expected consumer spending growth is expected to contribute to the recent easing trend in inflation indicators such as the Consumer Price Index (CPI) and Producer Price Index (PPI).
After the release of the retail sales data, investors have increased their bets on interest rate cuts this year. According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds futures market on that day reflected a 67.7% probability that the Fed will cut rates by at least 0.25 percentage points at the September FOMC meeting, up from 61.5% the previous day. The probability of a 0.25 percentage point or greater cut in November rose from 75.6% to 80.8%.
U.S. Treasury yields are declining. The 2-year U.S. Treasury yield, sensitive to monetary policy, fell 4 basis points (1bp = 0.01 percentage points) from the previous trading day to 4.71%. The 10-year U.S. Treasury yield, a global bond yield benchmark, moved down 3 basis points to around 4.24%.
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