[News] Strong U.S. Retail Sales and Declining Initial Jobless Claims in July Ease Recession Concerns

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The U.S. Census Bureau released retail sales data on August 15. In July, retail sales increased by 2.7% year-over-year, higher than the revised 2% from the previous month. On a month-over-month basis, retail sales rose by 1%, significantly above the revised -0.2% from the previous month and the market expectation of 0.4%. The control group retail sales (excluding auto sales, building materials, gasoline stations, and food services) increased by 0.3% month-over-month, down from the previous month’s 0.9%. The growth was primarily driven by auto sales, which increased by 4% month-over-month, while core retail sales (excluding auto-related sales) and double core retail sales (excluding auto sales and gasoline stations) both increased by 0.4%.

 

Additionally, the initial jobless claims data was released on the same day. The number of initial claims for unemployment benefits this week was 227,000, lower than the previous week’s 233,000 and the market expectation of 235,000. This marks the second consecutive week of decline in initial jobless claims.

 

As July’s inflation data continues to normalize, consumer spending remains resilient, and initial jobless claims come in better than expected, the probability of a 25 basis point rate cut has returned to 74% (compared to last week’s peak probability of 85% for a 50 basis point cut). However, the market is still awaiting the release of the non-farm payroll data and the unemployment rate, which are currently the Federal Reserve’s top concerns, before expectations for a rate cut in September may be adjusted.