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USDJPY Rallies then Falters Following Strong Advance Retail Sales

USDJPY Rallies then Falters Following Strong Advance Retail Sales

Christopher Vecchio, CFA, Senior Strategist

UPDATE: USD Advance Retail Sales (SEP) > +1.1% versus +0.8% expected, from +1.2% m/m (revised from +0.9% m/m) > USDJPY NEUTRAL

The American consumer continues to increase his spending despite weak labor markets and an uncertain income picture. Advance Retail Sales increased by +1.1% month-over-month in September, above the +0.8% m/m forecast, according to a Bloomberg News survey. The August figure was revised higher to +1.2% m/m from +0.9% m/m as well.

The subcomponents of the report were also strong. Retail Sales Less Autos grew by +1.1% in September from +1.0% in August, above the +0.7% forecasted. Sales stripped of automobile sales and gasoline sales were up by +0.9% m/m, well-above the +0.4% m/m forecasted. Also of note: Electronics sales were up by +4.5% m/m; Building Materials sales were up by +1.1% m/m; and the Food & Beverages sales component was up by +1.2% m/m.

This data is important because it is perhaps the best proxy to consumption figures, which account for nearly 75% of the headline GDP. The disconcerting trend here is that spending is increasing while real wages (wages adjusted for inflation) stagnate. Accordingly, with the savings rate at multiyear lows, the only way for American consumers to continue their spending is to take on debt; growth is not organic.

USDJPY 1-minute Chart: October 15 2012

USDJPY_Rallies_then_Falters_Following_Strong_Advance_Retail_Sales_body_Picture_1.png, USDJPY Rallies then Falters Following Strong Advance Retail Sales

Charts Created using Marketscope – Prepared by Christopher Vecchio

Following the release, the USDJPY initially spiked higher on the strong headline print, rallying from 78.77 to as high as 78.86. However, at the time this report was written, the USDJPY had fallen back to 78.72. Full USDJPY technicals can be viewed here and here.

--- Written by Christopher Vecchio, Currency Analyst

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