US: Strong headline and core figures in October retail sales - ING

According to Rob Carnell, Chief International Economist at ING, after today’s report that showed a gain of 0.8% in US retail sales, a rate hike in December from the Federal Reserve is “nearly in the bag”. 

Key Quotes: 

“Strong US retail sales, and an expectation of further gains in inflation (due out on Nov 17th) make the 92% market probability for a 14 Dec Fed rate hike look about right (nothing is 100% until it is done).”

“Not only were headline retail sales figures strong at +0.8%MoM, but there were strong core figures (control group which strips out the more volatile items also rose 0.8%MoM). The figures were stronger than the consensus expected (+0.6%MoM), and stronger still when upwards revisions to the previous months’ data are taken into account.”

“While a December hike looks as close to a done deal as one ever gets in markets, there are still questions about 2017 Fed policy. Markets are currently optimistic about Trump’s fiscal expansion in the US next year, and downplaying risks of a more deflationary protectionist policy mix. This might be right. That said, it places most of the risk on the downside, should expansion take longer to materialise than expected, or protectionism rear up more strongly than anticipated.”