– James Langton
(May 11 – 11:05 ET) – Traders may have been soothed by the surprising U.S. retail sales numbers this morning, but they don’t change the picture according to economists at CIBC World Markets Inc.
April retail sales were reported down 0.2% this morning. Economists were expecting a rise of 0.2% to 1.0%, with 0.5% the consensus expectation. While almost everyone was surprised by the decrease CIBC says, “The devil however, was once again in the details,” pointing to large upward revisions in the March numbers.
The headline number for March was revised up to 0.5% from the 0.2% that was initially reported. Ex-auto sales were revised up from 0.9% to 1.2%. CIBC argues that these revisions essentially make up for the lack of sales reported in April.
CIBC says these numbers reflect, “a pause rather than a stallout in the household demand.” It admits that there will be a slowing from previous sales rates, but it finds, “it would be premature to conclude on the basis of today’s numbers that the consumer is running out of gas.”
On this basis CIBC is sticking to its call for more tightening from the U.S. Federal Reserve Board, although it is resisting the trend to call for 50 basis points at the next meeting. “Today’s report does not change our expectation that the Fed will raise rates by 75 bps in coming months, including a further 25 bps increase next week.”