US: Retail sales to contract in May by 0.1% - TDS

Analysts at TDS expect US retail sales to contract in May, falling 0.1% on lower auto and gasoline station sales.

Key Quotes

“Motor vehicle sales once again disappointed, easing to a 16.6m unit annual rate vs 16.8m in April, and pointing to a modest drag on headline retail sales. A hefty decline in gasoline prices also suggests lower gasoline station sales receipts. Core sales – excluding food services, building materials and the above categories – are expected to partially offset these declines with a steady 0.2% increase. Though the headline figure appears weak, our projections for a solid showing in the core control group would be consistent with Q2 real PCE growth near a 3% pace.”

“Foreign Exchange

For the greenback, softer data has been a thorn in its side the past few months. Still, a modest drift lower in prices in unlikely to weigh on the dollar near-term since we have a broad-based deceleration in prices in much of the G10. Near-term what matters more is whether the moderation in prices derails the Fed from hiking at this week’s meeting, which we think is very unlikely. Equally important, the greenback is still showing a major discount to front-end rate spreads so a firmer inflation print could favor a tactical bounce against some of the major currencies, especially if the Fed delivers a hawkish hike.’”