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 and expansion which prevailed into the third quarter of the year. However, the most-recent figures do not exactly fit in with this theme.
According to the latest “advance” sales numbers released by the US Census Bureau, total retail sales contracted by 0.3% in September, well under the +0.3% which had been expected and much lower than August’s growth rate which was revised up from +0.4% to +0.6%. On an annual basis, the growth rate slowed to 4.1% from August’s revised rate of 4.3%.
US Treasury yields finished a few basis points lower on the day. By the close of business, 2-year and 10-year yield Treasury yields had both lost 3bps to 1.58% and 1.74% respectively while the 30-year yield remained unchanged at 2.23%.
Expectations of another cut in the federal funds rate at the upcoming FOMC meeting at the end of October firmed considerably. According to end-of-day prices of federal funds futures, the implied probability of a 25bps rate cut increased from the previous day’s 74% to 90%.