00:00Well, retail sales data are disappointing. We thought they might be a little bit lower, and they're a lot bit
00:06lower.
00:06Retail sales on a headline basis down by six-tenths of a percent. The forecast was for a one-tenth
00:12percent rise.
00:14Retail sales ex-auto down three-tenths. Retail sales ex-auto and gas down two-tenths.
00:21Now, of course, gasoline prices were lower during the month.
00:24And retail sales control, the part that goes into GDP, the part that economists tend to watch, is down by
00:31four-tenths.
00:31It was up by half a percent last month, at least on an unrevised basis.
00:36So we're going to have to check in to see where the weakness is in this.
00:41But it's definitely a disappointing report, and it may add to some of the do-not-raise-rates thoughts that
00:47people are having on Wall Street right now.
00:49Yeah, Mike, I'll let you dig through some of the details and just give you a read of markets.
00:53You can see equity futures still positive pretty much across the board.
00:58You are seeing not necessarily some sort of read-through in terms of negativity.
01:01In fact, if anything, more positive, up a tenth of a percent in the S&P futures.
01:06NASDAQ up a quarter percent. Russell's 2000 now turning just marginally positive.
01:10Two's tens and thirties, a little bit more interesting.
01:12As Mike was saying, giving a little bit more heft to the idea that this Fed can remain on hold.
01:17Now we're looking at that two-year yield lower by four basis points, 4.09999 percent.
01:24Are we going to see these yields fall below 4 percent once again before that September meeting?
01:29Ten-year yields lower by almost two basis points, 4.63 percent.
01:34But notably, the steeper yield curve, 30-year yields still elevated at 5.22 percent.
01:40We'll let Michael McKee keep parsing through this and let us know when you have more.
01:45If you are just joining us, retail sales month over month down by 0.6 percent versus the expectation of
01:52a 0.1 percent rise.
01:55When you take a look at the control group down 0.4 percent, the expectation had been an increase of
02:000.3 percent.
02:01And added to this, there was a downgrade to the June read.
02:050.4 percent, the revision was, rather than 0.5 percent.
02:10Just want to bring in Aditya Bahave of Bank of America, who has been sticking with their 75 basis point
02:16rate hike call for this year.
02:18Aditya, does this change anything for you based on this data?
02:22So it doesn't.
02:22We were expecting July retail sales to be soft.
02:25The control group actually came in slightly stronger than what we were expecting.
02:28We had a very weak number.
02:29This is the signal from the BAC card data.
02:32But the strength of that data is that it also tells us the intramonth trajectory.
02:36And then going into August, it tells us what happened.
02:39So basically, you had a dip at the start of the month, which is consistent with the pull forward of
02:43Prime Day into June,
02:44as well as the heat wave right around July 4th weekend.
02:47And then a recovery going into the end of the month.
02:50And by the first week of August, actually, you're seeing year-over-year spending numbers that are very similar to
02:55the very strong numbers that we saw in May and June.
02:57So this really, really looks like a one-off.
03:00It looks like a blip.
03:00I would just look through it.
03:01Well, Aditya, stay close.
03:03Mike has a bit more.
03:04Michael McKee, you've been parsing through the numbers.
03:06What jumps out to you as the reason for this disappointment?
03:11Vehicles, put it that way, because we saw motor vehicles and parts sales down 1.8 percent and gasoline stations
03:17down 9 tenths of a percent.
03:19Remember that gas prices went down during the month of July, and it looked like people were holding off on
03:26buying cars.
03:26But most of the rest of the categories did rise, with the exception of non-store retailers, down 2.2
03:33percent.
03:33And as we said earlier, Prime Days were in June this year instead of July.
03:37So you can understand why that happened.
03:40But you have strength in clothing, up 1.9 percent, which is probably the beginning of back-to-school season.
03:47General merchandise stores were up by three-tenths of a percent.
03:51And electronics was one other weak area, down half a percent.
03:56But building materials up three-tenths.
03:57Health and personal care up seven-tenths.
03:59So it looks like people were still spending money.
04:02They just may have moved it into different categories that changed the mix of this and led to it being
04:10down some more than anticipated.
04:12So it looks like people were still spending money on their own money on their own money on their own
04:12money on their own money on their own money on their own money on their own money on their own
04:12money on their own money on their own money on their own money on their own money on their own
04:12money on their own money on their own money on their own money on their own money on their own
04:13money on their own money on their own money on their own money on their own money on their own
04:13money on their own money on their own money.
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