Announced this morning, Retail Sales for October increased 1.3%, higher than expected and a solid rebound from the prior reading. In the month, Gasoline Stations, up 4.1%, Food Services & Drinking Places, up 1.6%, and Food & Beverage Stores, up 1.4%, were all relatively strong, while General Merchandise Stores, down -0.2%, were weak. 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 0.7% in October, much higher than expected and the previous month was also revised two tenths higher.
Overall, headline retail sales rebounded strongly in October and the control group was also markedly higher, even as the Federal Reserve continues to tighten monetary policy. However, as personal savings wanes and credit defaults increase it could become more difficult for consumers to cope with inflation. Comments in recent quarterly results from Walmart and Target note discretionary categories have lagged and consumers are using discretion for big purchases and are trading down in assorted items. Given these dynamics, the speed at which inflation falls coupled with the strength of the labor market will be key for the consumer and the economy in the months ahead.
In all, the 10-year US treasury yield initially moved higher following the report but is now ticking lower and equity futures are also lower as we head into the market open.
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