US retail sales had been trending up since late 2015 but, beginning in late 2018, a series of weak or negative monthly results led to a drop-off in the annual growth rate which brought the annual rate below 2.0% by the end of the year. After an unsteady start to 2019, subsequent months’ figures have produced a recovery which has prevailed into the third quarter of the year.
According to the latest “advance” sales numbers released by the US Census Bureau, total retail sales increased by 0.4% in August, double the +0.2% which had been expected but half as much as July’s revised growth rate of +0.8%. On an annual basis, the growth rate increased to 4.1% from July’s revised rate of 3.6%.
US Treasury yields finished a lot higher on the day, the net result of some conciliatory statements from both sides of the US-China trade dispute, slightly more-confident US households and the better-than-expected figures. By the close of business, 2-year Treasury yields had increased by 9bps to 1.80%, the 10-year yield had gained 13bps to 1.90% and 30-year yields had added 12bps to 2.37%.
Expectations of another cut in the federal funds rate at the upcoming September FOMC meeting remained firm, although not quite as firm as at the close of the previous day. According to end-of-day prices of federal funds futures, the implied probability of a 25bps rate cut was 79%, down from the previous day’s 88%. An additional cut at December’s meeting was viewed as less likely to happen and the implied probability of a rate cut fell from 66% to 58%.
The “non-store retailers” segment had the largest influence on the overall result for a fourth consecutive month. Sales in this segment increased by 1.6% over the month and by 16.0% over the previous 12-months. The next largest factor was the “building material” segment which increased by 1.5% over the month.