Poor Retail Numbers Reveal Feeble Foundation

Market Trends - 14/10/2015

The recent retail sales figures from the United States illustrated the underlying weakness in an economy that has, especially in the United States, been too focused on small wins disguised as full economic recovery. On a relevant note, those who have believed the market is truly recovering or those who are simply invested in the result of pressure through positive sentiment alone are staunchly in favor of an interest rate hike; and the arising complaints of a lack of just this have been loud. However, the dangerous inflation environment has, in other countries, been problematic to solve and attempts at changing monetary policy have done nothing but bring about wider troubles. American economic success is firmly tied to retail sales, and this is a major reason why the market panic nearly a year ago began with the same report missing expectations. While current conditions may not be enough to mirror the exodus from equities last year, the future developments that this report points to and also the real state of the economy that it highlights will certainly be enough to dent sentiment despite those who plug their ears and open their mouths.

Partly due to Chinese economic conditions, prices have inched their way lower in many categories, with retail spending serving to further these movements. Gas station spending dropped a significant 3.20% monthly, and taking the crown as the biggest loser among its 13 peer categories, with 6 others experiencing drops as well. The commodity market has pressured producer prices down as well, which have remained negative since March and provide data to the Federal Reserve that hints at an economy not ready for rates to normalize. Futures markets are reflecting this notion, pricing in 2016 as the potential lift off date, although even 2016 may be too early given today’s result. The observed ability of the Fed to take the reins of this economy is being quickly usurped by the many bad calls and even worse moves they have made in recent months. The dollar looks to continue to take a beating as a rate hike sets its sights on March.


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