Another test of the US consumer coming up later today | investingLive

The US retail sales data for July is the key risk event to watch out for in the session ahead. And if there’s one thing that we have always come to know about the data, is that never underestimate the (spending) power of the US consumer. That is a saying that has proven timeless for many years now.

For July, retail sales is estimated to be +0.5% m/m following a +0.6% m/m reading in June. The ex-autos estimate is more modest, seen at +0.3% m/m. Meanwhile, the control group estimate is expected at +0.4%. All in all, expectations are for the US consumer to once again prove their resilience.

Some analysts are pointing to a significant bounce in auto sales and higher prices to make up the “stronger” retail sales print. And that could be masking waning strength in US consumer spending as a whole. But barring a major miss on estimates, the expectation is that the report should reaffirm that the overall momentum in consumption activity remains healthy.

Morgan Stanley projects headline retail sales to beat estimates at +0.8% m/m, largely driven by a +3.4% m/m surge in auto sales. As for the control group reading, they are forecasting a +0.4% reading as “solid income growth and mild inflation should support nominal spending”.

With markets already pricing in a 25 bps rate cut for September, a Goldilocks scenario would prove ideal. If retail sales comes in more or less within estimates and just show some light signs of moderation in consumer resilience, that will be the best to reaffirm the current Fed pricing. That means a report that isn’t too hot nor is it too bad that it triggers recession concerns.