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. However, growth rates increased in trend terms through 2019 and the first set of figures for 2020 have been largely uncontroversial.
According to the latest “advance” sales numbers released by the US Census Bureau, total retail sales grew by 0.3% in January, in line with expectations but higher than December’s revised increase of +0.2%. On an annual basis, the growth rate fell back to 4.4% from December’s revised rate of 5.5%.
The report came on the same day as consumer sentiment and industrial production figures were released and bond yields fell a few basis points across the curve. By the close of trade, the 2-year Treasury yield was 2bps lower at 1.42% while 10-year and 30-year yields had both lost 3bps each to 1.59% and 2.04% respectively.
In terms of US Fed policy, expectations of another rate change in the next few months remained soft. According to end-of-day prices of federal funds futures, the implied probability of a 25bps rate cut at the FOMC’s March meeting ticked up from 10% to 11%, while the likelihood of a rate cut by or at July’s meeting moved from 55% to 56%.