Summary: Retail sales increases for second consecutive month; back to positive on annual basis; most segments make gains, some substantial; report viewed as “old news” given recent US infection rates.
US retail sales had been trending up since late 2015 but, commencing 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 that year. Growth rates then increased in trend terms through 2019 and into early 2020, until restrictions on American households took effect in March and April.
According to the latest “advance” sales numbers released by the US Census Bureau, total retail sales increased by 7.5% in June. The gain was a more than the 5.5% which had been expected and it was on top of the huge 18.2% jump after revisions in May. On an annual basis, the growth rate moved back into positive territory, increasing from May’s revised rate of -5.6% to 1.1%.
Despite the figures, US Treasury bond yields finished modestly lower as disappointing initial jobless claims figures took effect. By the end of the day, 2-year and 10-year Treasury yields had each slipped 1bp to 0.15% and 0.62% while the 30-year yield finished 3bps lower at 1.31%.
In terms of likely US monetary policy, expectations of any change in the federal funds rate over the next 12 months retained their slight easing bias. OIS contracts for July implied an effective federal funds rate of 0.079%, about 2bps below the current spot rate.
ANZ economist Adelaide Timbrell said the figures “were treated as old news, given recent developments…The sustainability of this rebound will be largely determined by whether another fiscal deal is reached.”
Most segments increased sales over the month, with the clothing stores, “Motor vehicle & parts dealers” and “Food services & drinking places” segments all providing the largest influences on the overall result. Sales in these segments increased by 105.1%, 8.2% and 20.0% respectively over the month.