US DATA: Redbook Report Continues To Point To Solid Retail Sales Into End-Sept
Sep-30 12:55
Same-store retail sales remained robust through late September, per the Johnson Redbook Retail Sales Index which rose 5.9% Y/Y in the week to Sept 27. This was up from the 5.7% rise the prior week and brings month-to-date sales growth to 6.1% Y/Y (only slightly below retailers' targeted 6.3% gain).
- The consistently solid Redbook results over the last several months have been a good guide to headline Census Bureau retail sales data over the same period, which has shown resilience in (nominal) consumption despite weak consumer sentiment. The August PCE report published last week enjoyed several upside revisions to originally-published data which showed that on a 3M/3M annualized basis, real consumption growth (both goods and services) is running at 2.4%, a pickup from 2.1% in July (revised up from 1.0%) and steady with June's 2.5%. On a quarterly annualized basis, real goods purchases were running at 1.8% in August.
- We won't get September Retail Sales data until Oct 16. That assumes there is no government shutdown underway at that point which would preclude the data release - if that's the case then Redbook releases will take on additional importance.
- The Redbook report anecdotes suggest some weather-related factors at play in late September: "With the back-to-school program now largely completed, seasonal shopping became the main focus during the fourth week. Generally, regions with cooler weather tended to experience better business. Stores reported modest sales in Halloween-related merchandise, with retailers noting that promoting the event earlier usually results in increased sales volume. Among various merchandise categories, consumables and essential items led sales at discount stores, indicating that demand was primarily driven by everyday needs rather than any specific seasonal trends."
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RATINGS: S&P Upgrades Portugal To A+ From A
Aug-29 20:28
S&P has upgraded Portugal's long-term credit rating to A+ from A, with a stable outlook (had been positive).
- This is the 7th S&P upgrade for Portugal, from a low of BB in 2012-15. Only four ratings are higher (AA-, AA, AA+, AAA). This is the same rating as Slovakia, and just above Spain (A) per S&P.
- Per Bloomberg: "*S&PGR UPGRADES PORTUGAL TO 'A+' ON LOWER DEBT; OUTLOOK STABLE"
STIR: Still Eyeing September And December Cuts
Aug-29 20:16
With few market-moving data points this week, implied Fed rate cuts essentially held onto their post-Jackson Hole upward repricing, adding a couple of basis points of easing for good measure heading into the Labor day weekend.
- Indeed, the lack of movement is somewhat remarkable given this week's extraordinary "firing" of Fed Governor Cook, which is currently being fought out in the courts. In all it probably added to the dovish tone on the near-term rate outlook post-Jackson Hole but not substantially so, at least so far.
- The current path sees a September rate cut priced with nearly 90% implied probability, with 56bp of cuts through end-year (a cumulatively priced second cut in December) and 83bp through March 2026 (3+ cuts).
MACRO ANALYSIS: MNI US Macro Weekly: One Week, Two Labor Days
Aug-29 20:10
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- A busy pre-holiday week for data brought mixed economic signals and little net change in Fed easing expectations, putting next week’s labor day – Friday with its nonfarm payrolls report, of course, with apologies to Monday’s federal holiday – in focus for the FOMC and market participants alike.
- Second-quarter GDP was revised up by more than expected in the second reading, to 3.3% Q/Q SAAR, driven by better-than-previously estimated domestic demand but still leaving 1st half growth in slightly weaker territory vs last year. That said, the Atlanta Fed's Q3 GDPNow estimate jumped to 3.47% (though the implied contribution from net exports in the quarter looks somewhat dubious, as we explain).
- The other major release of the week was July's Personal Income and Outlays report, which showed a modest uptick in income and spending on the month. However, the broader trends remain mixed at best, as real disposable income growth remains soft and services consumption is failing to regain traction.
- Core PCE inflation was close to expectations in July as the Y/Y accelerated to 2.9% for its fastest since February as it moves further away from recent lows of 2.6% having stalled above the 2% target. Recent trend rates are a little hotter but the median FOMC member will still need to see a further acceleration to meet their 4Q25 forecasts from June.
- Labor data were mixed. Latest jobless claims were in line to slightly better than expected, with initial claims trending a little higher but still impressively low whilst continuing claims are broadly plateauing after sharper increases in 1H25. But within the Conference Board consumer survey, the labor differential edged lower again, suggesting a continued upward trend in the unemployment rate.
- Elsewhere: regional Fed activity surveys were individually mixed, but combined generally showed an improvement in both manufacturing and services activity albeit with continued upside price pressures.
- Consumer sentiment (UMichigan and Conference Board surveys) and housing activity remained soft.
- Apart from Gov Waller again making the case from rate cuts, other FOMC colleagues who commented this week were a little more guarded when it came to the need for easing, to our ear.
