Announced this morning, Retail Sales for December decreased -1.1%, more negative than expected and a larger decline than the previous month. In the month, Department Stores, down -6.6%, Gasoline Stations, down -4.6%, and Nonstore Retailers, down -1.1%, were weak. Also, Food Services & Drinking Places fell -0.9% 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, decreased -0.7% in December, also more negative expected and a larger decline than the previous month. Meanwhile, the Producer Price Index decreased -0.5% in December much more negative than expected and increased 6.2% on an annual basis. The core rate, which excludes food and energy prices, increased 0.1% for December as expected and increased 5.5% on an annual basis.
Overall, a weak report on retail sales with both the headline and the control group figures declining more than the previous month. While some large financial institutions did note decent credit card activity in their recent quarterly reports released, the consumer appears under pressure as noted by decreases in nonstore retailers (online purchases) as well as food service and drinking places. The policy tightening efforts by the Federal Reserve appear to be affecting portions of the economy. Meanwhile, company inflation measures show further declines on a monthly basis, but annual figures remain elevated. Given these dynamics, the Federal Reserve is likely to slow their interest rate increases in the coming weeks but may keep rates higher for longer to ensure inflationary measures continue the downward trend toward their targets.
In all, the 10-year US treasury yield ticks lower following the report and equity futures are higher as we head into the market open.
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