The US retail sales data released on Monday was a huge miss:
With two months of 2025 retail sales data now in hand, signs of consumer caution are becoming increasingly evident. According to analysts at Bank of Montreal, real consumer spending appears on track for a sharp slowdown in the first quarter, with little prospect of returning to the stronger growth rates seen in the second half of 2024 anytime soon.
BoM go on:
This moderation in consumer demand presents a challenge for the Federal Reserve, which must navigate the risks of a slowing economy while remaining mindful of potential inflationary pressures. The prospect of sizable tariffs in the coming months adds another layer of uncertainty, raising the possibility of renewed price pressures even as consumer momentum fades.
For now, the Fed is likely to maintain its wait-and-see approach, holding off on any policy adjustments as it gathers more data. While today’s retail sales figures point to rising consumer strain, they do not yet signal a definitive shift toward recessionary conditions.
The Federal Open Market Committee (FOMC) decision is due on Wednesday.
This article was written by Eamonn Sheridan at www.forexlive.com.