Retail sales report a litmus test of US consumers’ health

The March FOMC minutes showed a diverse set of views within the Committee regarding the policy outlook, with some members still favouring a June interest rate hike. However, the meeting took place before the weak March payrolls release.

Moreover, accumulating evidence of a soft quarter of activity for the US economy have resulted in early estimates of Q1 GDP being gradually lowered, with median consensus estimates pointing to annualised growth of just 1.4%. 

However, with poor winter weather conditions thought to have played a significant role in the slowdown, the coming week's retail sales report for March is expected to provide a 'less-distorted' picture of the strength of domestic consumption, the principle recent driver of growth. 

"A combination of milder weather, rising real household incomes and firmer saving rates are expected tohave provided a supportive backdrop for retail activity last month with headline sales expected to have posted a rebound of 0.9%, alleviating fears of a sharper slowdown in activity", according to Lloyds Bank research.