US RETAIL SALES: ECONOMISTS EXPECT CONSUMPTION TO REBOUND IN FEBRUARY AFTER SHAKY START OF THE YEAR

• The United States Census Bureau will release Retail Sales data on Thursday.
• US Retail Sales are expected to have expanded by 0.8% in February.
• It is highly unlikely that Retail Sales readings change the Fed’s plans to cut rates in June.

The United States Census Bureau will publish the country’s Retail Sales report on Thursday, which is expected to show that the headline Retail Sales number will reverse the 0.8% monthly contraction seen in the first month of the year. So far, consumer spending among US residents has been performing erratically in recent months as market participants keep digesting the Federal Reserve’s (Fed) restrictive credit conditions.

According to the Census Bureau, “advanced estimates of U.S. retail and food services sales for January 2024, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $700.3 billion, down 0.8 percent (±0.5 percent) from the previous month, and up 0.6 percent (±0.7 percent) above January 2023.”

The Greenback, in the meantime, managed to regain some balance and motivate the USD Index (DXY) to bounce off recent multi-week lows near 102.30 (March 8), always amidst rising bets that the Fed might start its easing cycle in the summer, with June being the most likely candidate.

The recent move higher in the US Dollar was almost exclusively driven by higher-than-anticipated US inflation figures for February, which demonstrated that, despite the downward trend in domestic consumer prices, inflation remains a sticky issue. According to the US Bureau of Labor Statistics, the headline Consumer Price Index (CPI) rose 3.2% in the year to February and 3.8% when it came to the Core CPI.

Back to the potential rate cuts in the next few months, Powell's remarks at both his congressional testimonies hinted at the likelihood of interest rate reductions within the year. However, such measures would only be enacted once the Fed gains greater confidence in the trajectory of inflation returning to its targeted annual rate of 2%.