US retail sales worse than expected, but still off the charts

US retail sales worse than expected, but still off the charts

US retail sales showed unexpectedly weak growth, adding only 0.3% for November against expectations of 0.8% and 1.8% a month earlier. This release triggered a strengthening momentum in the dollar, with the DXY rising 0.2% immediately after the release. EURUSD is making a new weekly low at 1.1240.

US retail sales worse than expected, but still off the charts - 1

While the latest data is noticeably lower than expected, one cannot ignore the sharp rise of previous months. US sales are measured in money and are not inflation-adjusted. A price increase of 0.8% for November indicates a real decline in retail sales. However, it is still worth considering that by the same month a year earlier, sales were up 17.9% against a 6.5% increase in prices.

The chart clearly shows how the current sales level has broken away from its multi-year trend line. And this gap is partly due to logistical problems and is feeding inflationary pressures. What if the Fed aims to deflate this bubble? It seems, however, politicians are unlikely to announce such intentions.

Alex Kuptsikevich

Financial market professional with 16-years' experience and Senior financial analyst at FxPro. Author of daily reviews on the impact of economic events with comments regularly featured in top international and Russian media. Covers fundamental analysis, global markets, foreign exchange market, gold, oil, cryptocurrencies.

Alex Kuptsikevich is a regular contributor to both digital and print media including CNBC, Forbes, Reuters, MarketWatch, BBC and Coindesk.