{"id":143951,"date":"2019-03-19T10:25:41","date_gmt":"2019-03-19T14:25:41","guid":{"rendered":"https:\/\/www.countingpips.com\/?p=143951"},"modified":"2019-03-19T10:15:26","modified_gmt":"2019-03-19T14:15:26","slug":"whats-keeping-the-fed-on-the-sidelines","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2019\/03\/whats-keeping-the-fed-on-the-sidelines\/","title":{"rendered":"What\u2019s Keeping The Fed On The Sidelines?"},"content":{"rendered":"
March 19, 2019<\/div>
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By <\/strong>Orbex<\/strong><\/a><\/p>\n

The economic data over the week covered the\u00a0retail sales report for January<\/strong>\u00a0and\u00a0inflation<\/strong>\u00a0data. The data sets the expectations for the\u00a0FOMC meeting<\/strong>\u00a0due tomorrow.<\/p>\n

Following the\u00a0weak jobs report<\/strong>\u00a0in February, the US economic outlook is looking to start the first quarter on a weaker note, while inflation remains muted for the most part. The FOMC will be meeting this week, concluding its two-day monetary policy meeting.<\/p>\n

Economic data remains mixed with rising speculation that the first quarter might have also gotten off on a softer footing<\/strong>\u00a0compared<\/strong>\u00a0to the fourth quarter GDP for 2018.<\/p>\n

Retail Sales Recovers from December Slump<\/strong><\/h2>\n

The retail sales report<\/strong>\u00a0released last week showed an\u00a0unexpected<\/strong>\u00a0increase<\/strong>\u00a0in\u00a0January. The gains came with an increase in the purchase of building materials and discretionary spending. However, dampening the data was lower revised data for December\u2019s retail sales.<\/p>\n

\"Adjusted<\/a>
Adjusted Retail Sales vs Core (MoM)<\/figcaption><\/figure>\n

Data from the Commerce Department showed there was a much-needed respite for the economy in the backdrop of the weak jobs report for January.<\/p>

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Data indicated that\u00a0retail sales rose 0.2%<\/strong>\u00a0on the month<\/strong>\u00a0in January. December\u2019s data saw retail sales revised lower to 1.6% against the initial release which showed a 1.2% decline. This marked\u00a0December\u2019s retail sales declines as one of the largest since September 2009<\/strong>. On a year over year basis, retail sales rose 2.3% in January.<\/p>\n

Despite the pick up in retail sales for January, the data doesn\u2019t change expectations that the US economy is slowing its momentum.<\/p>\n

Excluding the automobiles, gasoline, food services, and building materials, retail sales rose 1.1% during the month in January. This followed a revised\u00a0core retail sales figure of 2.3% decline<\/strong>\u00a0in\u00a0December<\/strong>.<\/p>\n

Online sales and mail order sales increased by 2.6%, marking one of the biggest gains since December 2017. Building material sales jumped 3.3%, the biggest increase since September 2017.<\/p>\n

Sales at auto dealerships were down 2.4% which was the biggest drop since January 2014. This follows a modest increase of 0.3% in December. Sales at service stations fell 2.0% following weaker gasoline prices. Clothing and apparel also fell during the month while sales at restaurants advanced 0.7%.<\/p>\n

Retail Sales Forecast Downward Revision to Q4 2018 GDP<\/strong><\/h2>\n

Still, the January retail sales data was better than expected.<\/p>\n

Economists polled expected retail sales to remain flat during the month of January. The data was released late due to the\u00a0partial shutdown<\/a>\u00a0in the months of December and January. This further delays the February retail sales report which will now be released in early April.<\/p>\n

The retail sales report gives insights into the US consumer spending which feeds into the GDP report. The freshly lowered numbers for December could mean that the fourth quarter GDP is at risk of being revised lower.<\/p>\n

Initial estimates showed that the\u00a0US economy advanced 2.6%<\/strong>, which was more than the median forecasts of a 2.4% increase. Besides the retail sales, weakness from the\u00a0trade deficit and lower construction<\/strong>spending<\/strong>\u00a0has given a further boost to the prospects that the Q4 annualized GDP would be much lower than what was initially reported.<\/p>\n

With the\u00a0January data<\/strong>, the\u00a0GDP forecasts<\/strong>\u00a0are currently showing that\u00a0growth was at below 1.5% pace<\/strong>. This comes after February\u2019s payrolls report showed that the\u00a0economy added just 20,000 jobs<\/strong>\u00a0during the month. This was the slowest pace of jobs\u00a0added in nearly one and a half years.<\/p>\n

US Consumer Prices Rise 0.2% as Expected<\/strong><\/h2>\n

Headline\u00a0inflation<\/strong>\u00a0in the United States for\u00a0February<\/strong>\u00a0rose 0.2%<\/strong>\u00a0as expected, but the\u00a0annual inflation rate eased from 1.6% to 1.5%<\/strong>. The\u00a0core inflation rate grew just 0.1% on the month,<\/strong>\u00a0marking the smallest increase since August last year. Core inflation eased to a pace of 2.1% from 2.2% previously in February on an annualized basis.<\/strong><\/p>\n

\"CPI<\/a>
CPI YOY Index (US CPI Urban Cons 2019-03-14 13-17-27<\/figcaption><\/figure>\n

The increase in core inflation came due to a rise in shelter prices as well as personal care, apparel, and education.<\/p>\n

Headline inflation increased on a\u00a0rebound in gasoline prices<\/strong>\u00a0which nudged\u00a01.5% higher following a 5.5% decline in January.<\/strong><\/p>\n

Following the release of the CPI data, producer prices report for February showed a slower than expected increase.\u00a0Producer prices rose 0.1%<\/strong>\u00a0on both the\u00a0headline<\/strong>\u00a0and\u00a0core PPI.<\/strong>\u00a0The slowdown marks a fall in inflationary pressures at the factory gate.<\/p>\n

FOMC Meeting Coming Up \u2013 No Changes Expected<\/strong><\/h2>\n

The data comes ahead of this week\u2019s FOMC meeting. Officials have maintained that they\u00a0will be\u00a0patient in hiking interest rates<\/a><\/strong>. This week\u2019s Fed meeting will also feature the\u00a0economic forecasts<\/strong>, the\u00a0Fed\u2019s dot plot<\/strong>and a\u00a0press conference<\/strong>.<\/p>\n

\"Fed<\/a>
Fed Fund rates<\/figcaption><\/figure>\n

Investors will be looking to see how the policymakers will perceive the current slowdown in the economy as it reduces the expectations for a rate hike.<\/p>\n

At the\u00a0December meeting<\/strong>, the\u00a0FOMC signaled two rate hikes for this year<\/strong>. It is likely that officials will maintain this view at this week\u2019s meeting when the dot plot is released. This would put any of the three Fed meetings in June, September or December as the likely meetings where rates could be raised.<\/p>\n

But with\u00a0weaker data<\/strong>\u00a0in the\u00a0first quarter<\/strong>, any\u00a0prospects of a rate hike<\/strong>\u00a0could come during the\u00a0September or December Fed meetings<\/strong>.<\/p>\n

By <\/strong>Orbex<\/strong><\/a><\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

By Orbex The economic data over the week covered the\u00a0retail sales report for January\u00a0and\u00a0inflation\u00a0data. The data sets the expectations for the\u00a0FOMC meeting\u00a0due tomorrow. Following the\u00a0weak jobs report\u00a0in February, the US economic outlook is looking to start the first quarter on a weaker note, while inflation remains muted for the most part. The FOMC will be […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-143951","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/143951","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=143951"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/143951\/revisions"}],"predecessor-version":[{"id":143970,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/143951\/revisions\/143970"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=143951"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=143951"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=143951"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}