THE TAKEAWAY: [US retail sales grows in August by most in six months; Consumer prices rise at faster pace] > [Dampens scope for additional monetary easing by the Fed] > [USDJPY mixed]
U.S. retail sales increased in August by the most in six months, boosted by automobiles and high gasoline prices. The Commerce Department released a report today that showed that retail sales rose 0.9 percent in August, the second month of increased sales, following a revised 0.6 percent advance in July that was smaller than originally reported. The consensus forecast of 84 economists surveyed by Bloomberg News had called for a 0.8 percent increase in August sales.
The advance in consumer spending was broad-based, with retail sales less autos rising 0.9 percent, and sales excluding auto and gas climbing 0.1 percent in July. The stronger consumption data is likely to provide some optimism for third quarter growth, though persistent weakness in the labor market and stagnant wage growth will continue to restrain consumer spending.
At the same time, the Labor Department released a report that showed that U.S. consumer prices rose in August for the first time since March, climbing 0.6 percent from a month ago. Prices rose 1.7 percent from a year earlier in August, in line with economist expectations, following a 1.4 percent expansion the month prior. The core price index, which excludes volatile food and fuel costs, rose slightly less than forecast, climbing 1.9 percent year-on-year.
The faster pace of price growth and improvement in retail sales dampens scope for additional monetary easing by the Federal Reserve. Although the Fed announced another asset purchase program yesterday, the rebound in retail sales and consumer prices may soften the Fed’s dovish tone for easing monetary policy as it works towards boosting employment while preserving price stability.
USDJPY 1-minute Chart: September 14, 2012
Chart created using Market Scope – Prepared by Tzu-Wen Chen
The U.S. dollar tumbled against the Japanese yen in the initial minutes following data release. Despite some ensuing volatility, the greenback held onto most of its gains in the lead-up to the retail sales and consumer price reports. At the time this report was written, the USDJPY was trading at 78.06 yen.
--- Written by Tzu-Wen Chen, DailyFX Research
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
Learn forex trading with a free practice account and trading charts from FXCM.