US retail sales have been trending up since late 2015. While there have been patches of weakness along the way, later months’ figures have rebounded to higher levels. After reaching an annual growth rate of 6.6% in July 2018, sales figures from the following months brought the annual rate back to a little above 4% by November, or roughly where it was at the start of that year. The latest December report has brought the annual rate even lower.
According to the latest “advance” sales numbers released by the US Census Bureau, total retail sales contracted by 1.2% in December, which is much less than the +0.1% expected and substantially lower than November’s revised figure of +0.1%. On an annual basis, the growth rate fell back to 2.3% after recording 4.1% in November after revisions.
Financial markets reacted by sending Treasury yields lower across the curve. By the end of the day, the yield on 2-year Treasury bonds had fallen 3bps to 2.50%, 10-year yields were 5bps lower at 2.65% and 30-year bond yields had lost 5bps lower to 3.00%. However, prices in the futures market for federal funds were largely unmoved. Contracts implied no chance of a rate change at the upcoming March FOMC meeting and only a slim chance of a 25bps rise at either the June or September meetings.