US Household Spending Holds Firm

By James Knightley of ING Economics

Monday, April 15, 2024 10:20 AM EDT

Person Holding White and Blue Box

Image Source: Pexels

Remarkably strong retail sales numbers for March contradict somewhat weaker survey and credit card spending evidence, but with jobs, inflation, and activity all beating expectations the Federal Reserve is in no position to carry through with interest rate cuts anytime soon.

Retail sales beat all expectations

US retail sales rose a very robust 0.7% month-on-month in March versus 0.4% expected with only one forecaster predicting this outcome out of 64 analysts. February’s growth rate was revised up to +0.9% from +0.6% MoM with March strength led by non-store retailers (+2.7% MoM), general merchandise (+1.1%), and gasoline stations sales (up 2.1%). There was some weakness though with sporting goods (-1.8%), clothing (-1.6%) electronics (-1.2% and motor vehicles (-0.7%) all falling. The means that the control group, which excludes volatile items and better matches with broader spending trends, rose 1.1% versus the 0.4% consensus while February was again revised higher to +0.3% from 0.0%.

The fastest rate of growth that anyone forecast for this metric was +0.8% MoM, so as with the jobs data and the core inflation number this outcome is higher than absolutely everyone was forecasting. Official data suggests the US is booming, but the business surveys tell a more subdued story, much like the credit card spending data. This wide divergence is difficult to explain.

Retail sales levels – nominal & real

Source: Macrobond, ING

Fed needs to see a clear slowdown before being comfortable with rate cuts

In mitigation, we have to acknowledge that the retail sales number is a nominal dollar growth rate and with inflation running so hot this is accounting for much of the growth. Real retail sales, i.e. retail sales adjusted for inflation, are much weaker and essentially have been flat for the past three years as the chart above shows. Income growth is slowing, savings are being exhausted and the cost of borrowing on credit cards is at multi-decade highs. We expect spending and inflation to slow, but until it does the Fed won’t be contemplating rate cuts.

More By This Author:

Decent Eurozone Production Figures Are No Break From A Weak Trend
The Commodities Feed: Uncertainty And Risks Build In The Middle East
Key Events In Developed Markets And EMEA For The Week Of April 12

Disclaimer: This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any ...

Disclaimer: This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any particular user's investment objectives, financial situation, or means. ING forms part of ING Group (being for this purpose ING Group NV and its subsidiary and affiliated companies). The information in the publication is not an investment recommendation and it is not investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Reasonable care has been taken to ensure that this publication is not untrue or misleading when published, but ING does not represent that it is accurate or complete. ING does not accept any liability for any direct, indirect or consequential loss arising from any use of this publication. Unless otherwise stated, any views, forecasts, or estimates are solely those of the author(s), as of the date of the publication and are subject to change without notice.

The distribution of this publication may be restricted by law or regulation in different jurisdictions and persons into whose possession this publication comes should inform themselves about, and observe, such restrictions.

Copyright and database rights protection exists in this report and it may not be reproduced, distributed or published by any person for any purpose without the prior express consent of ING. All rights are reserved. ING Bank N.V. is authorised by the Dutch Central Bank and supervised by the European Central Bank (ECB), the Dutch Central Bank (DNB) and the Dutch Authority for the Financial Markets (AFM). ING Bank N.V. is incorporated in the Netherlands (Trade Register no. 33031431 Amsterdam). In the United Kingdom this information is approved and/or communicated by ING Bank N.V., London Branch. ING Bank N.V., London Branch is deemed authorised by the Prudential Regulation Authority and is subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. The nature and extent of consumer protections may differ from those for firms based in the UK. Details of the Temporary Permissions Regime, which allows EEA-based firms to operate in the UK for a limited period while seeking full authorisation, are available on the Financial Conduct Authority’s website.. ING Bank N.V., London branch is registered in England (Registration number BR000341) at 8-10 Moorgate, London EC2 6DA. For US Investors: Any person wishing to discuss this report or effect transactions in any security discussed herein should contact ING Financial Markets LLC, which is a member of the NYSE, FINRA and SIPC and part of ING, and which has accepted responsibility for the distribution of this report in the United States under applicable requirements.

less

How did you like this article? Let us know so we can better customize your reading experience.