Retail Sales Figures Spur a Volatile Session

Rates close little changed following mixed economic data. Swap rates spiked to intraday highs after September retail sales were revised significantly above original estimates. The 2-year yield nearly reached 4.40% while the 10-year yield crested above 4.50%. However, rates reversed course shortly thereafter and closed 5-8bps below their session highs. Fed President Goolsbee contributed to the move as he argued that rates will be “a lot” lower over the next 12-18 months, assuming inflation behaves as expected. Meanwhile, tech stocks plummeted today on a pullback of the “Trump trade,” largely due to concerns about inflationary pressures and the budget deficit. The NASDAQ fell 2.24% today and is down nearly 3.5% from all-time highs reached two days ago.

Mixed retail sales results fail to offer clues on a trend. Across all measures, retail sales growth slowed in October from September, and none of the measurements met expectations (headline was slightly higher than expected while the other measurements all fell below). September’s headline and core sales were upwardly revised to double their original results, and the super-core measure also saw a significant upward adjustment. Those updates may foreshadow a strong holiday season and could indicate that consumers are doing better off at year-end than originally thought.

Today’s release does little to help observers identify a clear consumer spending trend. Year-to-date, monthly headline retail sales growth has ranged from -1.1% to 1.2%, and no clear direction has materialized. Retail sales data isn’t adjusted for inflation, which not only makes it difficult to parse through historical results, but also clouds the future outlook. Chief US economist at Santander US Capital Markets Stephen Stanley said, “My view is that the consumer is due for a bit of a slowdown, and these data are consistent with that view, though they are certainly far from a disaster.”

China retail sales rebounds as Trump tariffs loom. China’s goal to achieve 5% GDP growth in 2024 and beyond is largely dependent on a consumer spending rebound, especially with newly elected President Donald Trump threatening 60%+ tariffs on most exports. China’s recently announced stimulus packages have paid some early dividends, as evidenced by today’s retail sales data. Retail sales expanded at 4.8%, the fastest pace since December 2023 and well above last month’s 3.2% expansion. Despite the progress, Jacqueline Rong, chief China economist at BNP Paribas, stated “whether the mild recovery can continue next year depends on what additional policies will be rolled out. We think further policy support is needed to maintain the momentum of growth in 2025.”