In-depth analysis on Credit Writedowns Pro.

Measure used for GDP calculations in retail sales fell 0.3% for the second month

By Marc Chandler

The June retail sales report was simply dismal. Not only did sales decline by 0.5% in June rather than rise 0.2% as the consensus expected, but the April data were revised. The measure used for GDP calculations, excludes gasoline, auto and building material sales fell 0.3% for the second consecutive month.

While the May data was unrevised, April’s 0.2% decline turned into a 0.5% fall. April’s ex-auto sales were off 0.6% rather than -0.3%. Economists will likely cut Q2 GDP forecasts and market participants will anticipate additional easing measures by the Federal Reserve.

On its face, the Empire State survey was better than expected, rising to 7.39 from 2.29. The consensus had expected around a 3.8 reading. However, the details were poor. The forward looking orders component is posting its first negative reading (-2.69) since Nov 2011. Unfilled orders, the pipeline, fell to -13.58, the lowest reading of the year from -5.15.

The dollar dropped on the news, as one might expected. The euro bounced from about $1.2175 to almost $1.2250, but the momentum appears to be stalling. The dollar is extending its losses against the yen and moving below JPY78.80. The mid-June low near JPY78.65 is seen as the next level of support. As risk-off considerations dominate, the Canadian dollar derived no benefit from news that foreign investors bought a record amount of Canadian securities in May. Sterling bounced three quarters of a cent to new highs for the day just above $1.56. Trend line resistance, drawn off the mid-June and early July highs comes in near $1.5650 today.

The US stock market is poised to open lower and there is much talk about the possible crossing of the 50 and 200 month moving averages. Friday may have snapped a 6-day declining streak, but the key is follow thought today.

Marc Chandler

About 

Marc Chandler joined Brown Brothers Harriman in October 2005 as the global head of currency strategy. Previously he was the chief currency strategist for HSBC Bank USA and Mellon Bank. In addition to frequently providing insight into the developments of the day to newspapers and news wires, Chandler's essays have been published in the Financial Times, Barron's, Euromoney, Corporate Finance, and Foreign Affairs. Marc appears often on business television and is a regular guest on CNBC and writes a blog called Marc to Market. Follow him on twitter.