Consumers are not yet reacting to the higher rate regime
US retail sales for April bounced back from the previous two months declines, rising 0.4% over the month to USD 686 billion with seven of the 13 retail categories rising. This was, however, below estimates of a 0.8% advance.
Core retail sales, which excludes autos and gasoline (or cars and petrol this side of the pond), came in broadly in line with forecasts. Consumers are still happily consuming although there was a modest tilt in spending patterns with some discretionary areas like clothing, furniture, sporting goods and electronics showing modest declines, albeit this is just one data point and far from an observable trend.
The key takeaway is that while many will point to recessionary clouds on the horizon, it is not currently being translated into reduced spending patterns on main street and consumers are not yet reacting to the higher rate regime the Federal Reserve (Fed) has instigated. Does this mean a pivot from the Fed is imminent as markets are hoping for? Unlikely, based on this datapoint.
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