In this morning’s data, Retail Sales for January increased 3.0% which is higher than expected and a nice rebound from the previous month. In the month, Motor Vehicle & Parts Dealers, up 5.9%, and Furniture & Home Stores, up 4.4%, were strong while spending at Gasoline Stations, flat for the month, was relatively weak. Also, Food Services & Drinking Places increased 7.2% in the month. The Control Group, which is a closer measure of the inputs for GDP that excludes sales for food, autos, building materials, and gas stations, increased 1.7% in January, also higher than expected and rebounding from the previous month. Meanwhile, yesterday the Consumer Price Index increased 0.5% in January as expected and increased 6.4% on an annual basis. The core rate, which excludes food and energy prices, increased 0.4% for January as expected and increased 5.6% on an annual basis.
Overall, a rebound for retail sales in January following last month’s declines. Consumers were active, especially in dining out given the increase in food service and drinking places, which was also highlighted by comments in recent earnings reports on credit card activity. Meanwhile, inflation figures were as expected and ticked a bit higher from the previous month; however, a downward trend remains in place. Given these data points, the Federal Reserve is likely to keep rates higher for even longer to ensure that inflation continues its downward trend and a lower level can be sustained that is closer to their target.
In all, the 10-year US treasury yield ticks higher following the report and equity futures are lower as we head into the market open.
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