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    US retail sales disappoint in October; unlikely to detract Fed in rate decision

    Retail sales in the United States rose by less than expected in October, posting a modest growth of just 0.1% month-on-month. Consensus estimates were for retail sales to grow by 0.3% m/m. Adding to the feeble data was a downward revision to the previous month’s figure, which was revised down to 0% from 0.1% m/m. On a 12-month basis, retail sales were 1.7% higher.

    The core retail sales measure, which excludes items such as building materials, motor vehicles and parts, gasoline, and food services, was up 0.2% m/m and compares with an upwardly revised 0.1% increase the previous month and expectations of a 0.4% rise. Core retail sales are considered more important by some economists as they are used in calculating GDP.

    Automobile sales, which have risen strongly over the past year, proved a drag in October as they fell by 0.5% during the month after jumping by 1.4% in September. Sales at gasoline stations continued to decline due to lower fuel prices and were down by 0.9% m/m. Over the year, gasoline sales were down a whopping 20.1%. Non-store retailers posted a 1.4% increase in sales, while also performing strongly were building materials and supplies dealers which saw sales rise by 0.9%. Grocery stores recorded a fall in sales by 0.3%.

    Today’s numbers may not provide much confidence on the strength of the US economy but were not significantly weaker to worry the Fed that the growth momentum is waning. Consumer spending comprises a large portion of the US economy and any signs of a sustained weakness in private consumption would make it difficult for the Fed to follow a tightening cycle.

    The dollar plunged immediately after the figures were released but soon recovered to levels before the data. It hit a low of 122.43 against the Japanese yen but was back up at 122.73 yen in late European session. Comments by Cleveland Fed President Loretta Mester that the time for a rate rise is “quickly approaching” reinforced expectations of a December rate hike and lifted the dollar. The euro spiked to 1.0794 dollars but quickly fell back to extend earlier loses to around 1.0734 dollars. The pound also returned to its earlier intra-day range to trade at 1.5218 dollars after jumping to 1.5263 dollars.

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