US June retail sales data shows that excluding the impact of cyber attacks on car dealers, the monthly growth rate reached its highest level in three months. US consumer spending has rebounded, but the market still predicts a 100% chance of the Federal Reserve starting to cut interest rates in September.
US Census Bureau data released yesterday showed that retail sales in June were flat compared to May (year-on-year growth of 2.3%), as the decline in income from car dealers due to the CDK hacker attack was offset by the widespread strength in other sectors, reflecting the resilience of US consumer spending.
Excluding the impact of cyber attacks on car dealers, US June retail sales saw the highest increase in three months. Retail sales excluding automobiles grew 0.4% from the previous month (not adjusted for inflation), with May’s growth rate revised up to 0.1%, indicating a recovery in consumer spending at the end of the second quarter.
Note: CDK Global, the largest automotive dealership software provider in the United States, was hit by a hacker attack in mid-June, resulting in the paralysis of over 10,000 car dealerships and a significant decline in sales in the second quarter. However, the industry expects sales to rebound in July.
The data contradicts the trend of gradually slowing consumer growth in recent months. The pressure of higher interest rates and a cooling labor market has been felt by Americans in the first half of the year. This indicates that despite the cooling inflation data and the imminent start of interest rate cuts by the Federal Reserve, the US economy remains resilient.
Rubeela Farooqi, Chief US Economist at HighFrequency Economics, commented, “Consumer and economic activity has slowed significantly until 2024. But the situation is far from weakening to the extent of being considered a recession. We believe that the improvement in spending and growth data, as well as inflation data, supports a relaxed monetary policy stance.”
Quincy Krosby, Chief Global Strategist at LPL Financial, told Reuters, “This report does not negate the expectation that the Federal Reserve will cut rates at its September 18 meeting unless inflation-related data shows an increase in prices.”
The latest retail sales data also did not weaken market expectations of a rate cut by the Federal Reserve in September. CME FedWatch tool shows a 100% possibility of a rate cut in September (93.3% probability of a 1-point cut, 6.7% probability of a 2-point cut).
With the financial market expecting a 100% rate cut in September and further rate cuts in November and December, major US stock indexes all closed higher on Tuesday. The Dow Jones surged over 740 points, achieving its best single-day performance in 13 months, while the S&P also reached a new record high.
The Dow Jones Industrial Average rose 742.76 points, or 1.85%, to close at 40,954.48.
The Nasdaq Composite Index rose 36.77 points, or 0.2%, to close at 18,509.34.
The S&P 500 Index rose 35.98 points, or 0.64%, to close at 5,667.2.
The Philadelphia Semiconductor Index rose 26.32 points, or 0.46%, to close at 5,804.03.
Earlier today, Bitcoin also surged to $66,117, with a temporary report of $65,176 before the deadline, a 1.76% increase in the past 24 hours.