The December Retail Sales report from the U.S. Census Bureau is scheduled for release on Wednesday, January 17th at 5:30 (Dubai Time). Retail sales are expected to have increased by 0.4%, driven by increased spending during the holiday season, up from a 0.3% increase in November.
Excluding vehicles, consumer spending is expected to stay constant at 0.2% MoM. Goldman Sachs expects a 0.6% rise in headline retail sales for December, expected to be driven by higher auto sales which represents around 20% of retail sales. However, slower growth in certain retail categories and a small rise in Covid-19 cases could negatively impact the data.
Any noticeable rise in retail sales could reduce the chances of a Fed rate cut in March, as rising consumer expenditure risks further demand-pull inflation. Consumer spending and disposable income could be restrained by a higher-for-longer rate path from the Fed. Therefore, investors should closely watch for any upcoming statements from FOMC members.
Retail sales directly impacts the markets since consumer spending is a key driver for economic growth. Higher consumer confidence translates larger spending and less saving amongst consumers. A robust economy is reflected by strong sales, whilst a weak economy is shown through weak sales. A stronger dollar is also correlated with a strong sales volume.
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