"Terrifying data" exceeds expectations, further undermining the market's expectations for a Fed rate cut this year

On Thursday, the increase in US retail sales in September was slightly higher than expected, supporting the view of strong growth in the economy in the third quarter. US retail sales in September recorded a monthly rate of 0.4%, exceeding the expected 0.3% and the previous value of 0.1%. The number of initial jobless claims in the US as of October 12th was 241,000, lower than the expected 260,000, with the previous value revised up from 258,000 to 260,000. After the release of retail sales and initial claims data, traders expect the Fed to reduce interest rates by a smaller margin this year. The US dollar index rose more than 20 points in the short term. Spot gold fell by $5 in the short term. The retail sales report did not show signs of weak consumption, leading to a decrease in the probability of a Fed rate cut in November from 95% to 87%. Non-store retailers (mainly e-commerce) continued to perform strongly, growing by 7.1% compared to last year. Food services and beverages also performed well, with a year-on-year growth of 3.7%, a good sign of healthy consumption. Strong sales data indicate that consumers are showing resilience in the face of rising inflation and interest rates. Excluding automobiles, gasoline, building materials, and food services, retail sales increased by 0.7% last month, compared to an unrevised growth rate of 0.3% in August. This so-called core retail sales figure is most closely related to the consumer spending component of Gross Domestic Product (GDP). Signs of economic recovery may not prevent the Fed from cutting interest rates again next month, but it will reinforce expectations of only a 25 basis point cut. As for the unexpected drop in initial jobless claims in the US, it may have been distorted by hurricane weather. In the southeastern states affected by Hurricane Helen and Milton, the number of applicants surged in the previous week, indicating possible fluctuations in the coming weeks. The damage caused by hurricanes Helen and Milton has left many people unable to work, and may even be unable to apply for relief. This means that the number of applicants will continue to fluctuate in the short term, although economists expect this irregular situation to eventually subside. Prior to this, the weekly number of applicants remained low, partly because the number of Americans losing their jobs was relatively small. The four-week moving average of initial jobless claims rose to 236,250, the highest level since August. Steady income growth, ample savings, and strong household balance sheets support consumer spending and the overall economy. Despite a slowdown in the labor market momentum, the number of layoffs remains at historically low levels, supporting wage growth. Jonathan Millar, Senior Economist at Barclays, said, "As we have long pointed out, throughout the entire economic expansion process, consumer spending, net hiring, and wage income have been in a resilient and self-reinforcing virtuous cycle, driven by the increase in household wealth and labor supply." They believe that "to make consumer spending deteriorate persistently, some serious disruptive factors are needed: for example, consumers strengthening preventive measures to increase the savings rate, or even with strong demand, companies are unwilling to hire."