EB SECURITIES: U.S. Consumer Spending Rate Exceeds Expectations, Economic Resilience Still Strong

EB SECURITIES released a research report stating that the August 2024 retail sales data in the United States exceeded expectations. On one hand, the month-on-month retail sales growth in July was revised upwards to +1.1%, and despite the high base pressure, retail sales in August continued to increase month-on-month. Grocery stores and non-store retail consumption were the main drivers, reflecting the resilience of American consumption. Looking ahead, considering that consumption accounts for nearly 70% of the US GDP, stable consumption means that the US economy is unlikely to slow down. The space for further decline in manufacturing PMI and unemployment rate is relatively limited, so there is no need to be overly pessimistic about the US economy at present. The key points of EB SECURITIES are as follows: Event: On September 17, the US Department of Commerce released the August 2024 retail sales data in the United States: 1. Month-on-month growth in retail sales was +0.1%, compared to an expectation of -0.2%, and the previous value was revised from +1.0% to +1.1%; 2. Core retail sales (excluding automobiles and gasoline) month-on-month growth was +0.1%, compared to an expectation of +0.2%, and the previous value was +0.4%. Market reaction: Retail data exceeded expectations, and the probability of a significant rate cut by the Federal Reserve has slightly narrowed. Except for the Dow Jones Index, the NASDAQ and the S&P 500 Index closed higher on Tuesday (September 17), with changes of -0.04%, +0.03%, and +0.20% respectively. The 10-year US bond yield increased by 2bp to 3.65%, and the 2-year US bond yield increased by 3bp to 3.59%. Core points: How to understand the higher-than-expected consumer data in August in the United States? On one hand, the month-on-month retail sales growth in July was revised up to +1.1%, and despite the high base pressure, retail sales in August continued to increase month-on-month. Grocery stores and non-store retail consumption were the main drivers, reflecting the resilience of American consumption. On the other hand, looking ahead, considering that consumption accounts for nearly 70% of the US GDP, stable consumption means that the US economy is unlikely to slow down. The space for further decline in manufacturing PMI and unemployment rate is relatively limited, so there is no need to be overly pessimistic about the US economy at present. From the perspective of a rate cut, the possibility of a 50 basis point rate cut in September has slightly narrowed. The market has not yet reached a consensus on the extent of the rate cut in September (25bp or 50bp), depending on whether the Federal Reserve considers itself to be behind the curve. We believe that, although the Federal Reserve is open to the extent of the rate cut in September, considering the recent higher-than-expected retail data, falling unemployment rate, and rising wage growth, the US economy remains robust. The possibility of a preemptive rate cut is greater, and with a slight rebound in core inflation in August, inflation still shows resilience, so a 25bp rate cut in September may be more reasonable. Risk warning: The US economy experiences a more severe downturn than expected; Unexpected developments in geopolitical situations.