The latest report from the US Census Bureau came out on Monday. It showed that retail sales went up by a big 0.7% in March, which was more than expected.
This increase shows that people are still spending money, even when things are tough. It also means that February’s sales were even better than we thought, with a revision from 0.6% to 0.9%.
This good news about sales suggests that the economy is picking up speed again.
Because of this, experts who study the economy are now thinking that the Gross Domestic Product (GDP), which measures how much the country’s economy is growing, will be even higher than they thought.
For example, Tom Simons from Jefferies thinks the GDP will grow by 3.1% in the first three months of this year. That’s better than the earlier estimate of 2.2%. The Atlanta Federal Reserve also adjusted its prediction for GDP growth in the first quarter to 2.8% from 2.4%.
Rate of The Inflation and the Growth Expected
After the good news about retail sales, people are expecting inflation, which is when prices for things go up, to stay high for a while.
This matches the feeling that Americans are still spending money well, thanks to lots of people having jobs and wages going up a lot compared to the past few decades.
This news made the bond market move quickly. Yields, which show how much money you get back from bonds, went up. For example, the yield on the 10-year bond reached its highest point in five months, at 4.66%.
The two-year bond yield also almost hit its highest level, at 4.95%. The five-year inflation break-even, which is like a prediction of inflation over the next few years, also went up to its highest level since March 2023. This means that people expect prices to keep rising in the next few years.
Reaction of the Equity Market
After the retail sales report came out, the US dollar got stronger compared to other currencies around the world. This made the US dollar index go up.
As a result, the Japanese yen lost a lot of its value, reaching over ¥154 per dollar for the first time since 1990.
People are now thinking that the Federal Reserve, which manages the country’s money, might not lower interest rates as much as they thought. They’re now expecting the Fed to lower rates by one or two quarter-point reductions in 2024. This has helped make the dollar even stronger.
On the other hand, the stock market in the US didn’t do as well. The S&P 500 futures went down a bit, although they briefly went up by 0.5%.
Tesla Inc. saw its stock price drop by 3.4% after announcing they were reducing their workforce. But Goldman Sachs did well, with its stock going up by 3.6% after reporting strong earnings for the first quarter.
