U.S. retail sales growth in March beat expectations again, with a sharp upward revision from the previous month, further weakening expectations for interest rate cuts.
On Monday, April 15, the U.S. Census Bureau released retail sales data for March. According to the data, retail sales in the United States increased by 0.7% month-on-month in March, and the previous value was revised to 0.9% from 0.6%, which also exceeded market expectations of 0.4%.
Retail sales exceeded expectations across the board, specifically:
Retail sales increased by 0.7% month-on-month, with an expectation of 0.4% and a previous value of 0.9%;
Excluding automobiles, retail sales increased by 1.1% month-on-month, with an expectation of 0.5% and a previous value of 0.3%;
Excluding automobiles and natural gas, retail sales increased by 1% month-on-month, with an expectation of 0.3% and a previous value of 0.5%;
Core retail sales (excluding automobiles, gasoline, construction materials and food services) rose 1.1% month-on-month versus 0.4% expected, the biggest increase since February 2023.
However, adjusted (roughly) for inflation, "real" retail sales (non-seasonally adjusted) declined, with 12 of the last 17 months of decline.
The U.S. dollar index rose about 20 pips in the short term to 106.15 after the release of retail sales data, and USD/JPY rose above 154. U.S. stock futures edged lower in the short term, and multi-maturity U.S. Treasury yields hit new highs this year. Spot gold has little volatility in the short term, and is now trading at $2355.43 an ounce.
Gasoline sales rose and e-commerce saw the largest increase
Nine of the 13 key categories released saw sales increase compared to a month ago.
Among them, gasoline and e-commerce increased the most. Spending at gas stations has increased due to the increase in gasoline prices this month.
Motor vehicles and parts fell the most after a surge last month, and sales of department stores and electrical appliances also fell sharply last month.
Is the rate cut far away?
Consumer spending, which accounts for about two-thirds of the U.S. economy, has been called the "strongest pillar" of the U.S. economy, and the report shows that consumer spending remains resilient. As long as the strong labor market supports household demand, inflation is likely to become entrenched in the economy and further delay the Fed's rate cuts.
Stronger-than-expected retail sales data in March further undermined investors' confidence that the Federal Reserve will start cutting interest rates this year, and market expectations for monetary policy have shifted to the Fed will start cutting rates later, and traders no longer expect a 100% rate cut before November.
In addition, New York Fed President Williams, who has permanent voting rights in the FOMC and is known as the "Fed's third-in-command", said that the Fed may start lowering interest rates this year if inflation continues to decline gradually. He said monetary policy is in good shape, with consumers and the overall economy continuing to be strong:
We need to start a process at some point to bring interest rates back to more normal levels, and my personal view is that the process could start this year.
Fed officials predicted only three rate cuts in their projections released last month. Williams said last week that while the Fed has made great progress in balancing inflation and employment targets, there is no need to cut interest rates anytime soon.
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