[News] Strong US retail sales and falling initial jobless claims in July ease recession concerns

The U.S. Census Bureau released retail sales data on August 15. In July, retail sales rose 2.7% year-over-year, up from the previous month's revised 2%. On a monthly basis, retail sales rose 1%, well above the previous month's revised -0.2% and the market expectation of 0.4%. Control group retail sales (excluding auto sales, building materials, gas stations, and food services) rose 0.3% month-over-month, down from the previous month's 0.9%. Growth was primarily driven by auto sales, which rose 4% month-over-month, while core retail sales (excluding auto-related sales) and dual core retail sales (excluding auto sales and gas stations) both rose 0.4%.

Also released on the same day were initial jobless claims data. Initial jobless claims this week came in at 227,000, below the 233,000 last week and the 235,000 the market was expecting. This is the second consecutive week of declines in initial jobless claims.

With July inflation data continuing to normalize, consumer spending holding steady, and initial jobless claims coming in better than expected, the probability of a 25 basis point rate cut has risen back to 74% (up from last week's highest probability of 85% for a 50 basis point cut). However, the market is still waiting for the release of nonfarm payrolls and unemployment data, which are currently the Federal Reserve's biggest concerns, before potentially adjusting expectations for a September rate cut.