Summary:

• US retail sales miss forecasts to fall for 2nd consecutive month
• PPI rises to 2.5% Y/Y to provide some USD support
• USD remains higher on the day after recent losing streak

The biggest economic data release of the afternoon has seen a disappointing number for consumer spending in the US, with retail sales unexpectedly declining in the month of February. The M/M reading showed a print of -0.1%, below the 0.3% expected and even though the prior was revised higher to -0.1% (from -0.3% previously) it is still a pretty poor reading. 

 Retail sales in the US remain a potential source of weakness with today’s data missing forecasts. Source: XTB Macrobond

The core data isn’t a lot better either, with a M/M gain of 0.2% missing the 0.4% expected. Again here there’s an upwards revision to the prior number which now shows a small rise of 0.1% compared to 0.0% beforehand. 

Whilst consumer spending is nearly always part of a consideration on the economy, the markets at present are more interested in inflation and the US dollar received some support on this front from another release at 1:30PM (GMT). The February PPI Y/Y increased a little less than expected (2.5% vs 2.6% exp) but against a prior print of 2.2% this is a fairly marked rise nonetheless.  

 

 Both the PPI and core PPI continue to rise and are currently well above the 2% target. Source: XTB Macrobond 

If we strip out the food, energy and trade components of the PPI to obtain a “core” reading it’s a similar picture with this metric rising to 2.7% Y/Y from 2.55% prior. It is quite clear that this inflation measure is in an uptrend and whilst the more widely viewed CPI (released yesterday) and PCE core are not at as high levels at present they could present a headache for the Fed should they follow its lead. 

The USD index (USDIDX on xStation) is trading higher today and looking to end a run of three successive declines. After moving firmly higher on Friday following the strong NFP reading the market has declined in the shorter Sunday night session and Monday and Tuesday. The broader range from 88.25-91.00 remains in tact with some smaller shorter term support possible at 89.40.

 The USDIDX is rising today after three consecutive days of declines. Source: xStation