Updated at 9:07 AM EDT
U.S. retail sales bumped higher in August, adding a further layer of uncertainty into the Federal Reserve’s rate-cut debate as consumer spending continues to show resilience into the autumn months.
Headline retail sales rose 0.1% last month, the Commerce Department reported Tuesday, to a collective tally of $710.8 billion, stronger than economists’ consensus forecast of a 0.2% decline. The July total was revised higher as well, to an advance of 1.1% from the original estimate of a 1% gain.
Gasoline-station sales were down 1%, the report indicated, after Energy Department data showed the national average slipped 2.8% from July to $3.507 per gallon.
The closely tracked control-group number, which excludes autos, building materials, office supplies, gas-station sales and tobacco, and feeds into the government’s GDP calculations, rose 0.3% on the month and matched Wall Street forecasts.
Fed Chairman Jerome Powell is trying to achieve a soft landing for the U.S. economy, taming inflation without triggering a spike in unemployment.
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The Atlanta Fed will update its GDPNow forecasting tool later in the session. Its most recent reading, published Sept. 9, suggests a current-quarter growth rate of 2.5%.
“Investors are walking a tightrope in the short term, as the market is cheering for lower inflation but is looking for signs of strength from the consumer,” said Bret Kenwell, U.S. investment analyst at eToro. “It’s a difficult balancing act to see pricing pressures ease without a large dropoff in demand, but we continue to inch toward that reality.”
“While this report didn’t blow estimates out of the water, it’s enough to reassure investors and remind them that the consumer is more resilient than many think,” he added
U.S. stock futures extended gains following the data release, as traders bet that the solid spending tally supports a soft landing for the world’s biggest economy even if it might tame bets on a big Fed rate cut.
The S&P 500 is called 26 points higher, with the Dow expected to add 143 points from last night’s record close. The Nasdaq, meanwhile, is called 130 points higher.
Benchmark 10-year Treasury note yields rose 1 basis point to 3.629% following the data release, while 2-year notes were up 3 basis points to 3.582%.
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The CME Group’s FedWatch indicates the Fed will lower its benchmark Federal Funds Rate by at least half a percentage point tomorrow in Washington, with the odds of a quarter-point cut pegged at 33%.
Commerce Department data last week showed that headline consumer-price inflation for August slowed to an annual rate of 2.5%, the lowest since February 2021, while core price pressures held at a three-year low of 3.2%.
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The Labor Department’s summer jobs reports have also been dovish. They’ve showed the slowest advance in new hires so far this year following downward revisions for June and July and a headline tally of 142,000 in August.
Last month, the agency’s Bureau of Labor Statistics also trimmed around 818,000 jobs from its estimate of gains over the 12 months ended in March, with overall employment for the period pegged at around 2.1 million.
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