Weak Retail Sales Report Puts Tapering On Hold

On Monday, the Census Bureau announced that retail sales in the U.S. rose at a slower pace than expected in June. The move has prompted some to revise down second quarter growth estimates and decreases the likelihood that the Fed will taper purchases in September.

Weak Report

For the month of June, retail sales rose 0.4 percent, below the forecast of 0.8 percent growth from May. Worse, the figure for May was revised lower to 0.5 percent from 0.6 percent at the first estimate.

Meanwhile, core retail sales declined 0.1 percent in June fro May compared to an expected gain of 0.4 percent. In May, the core retail sales figure, which excludes volatile items such as autos and gasoline, rose 0.3 percent.

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Managing Editor at Yahoo! Finance Aaron Task tweeted following the news release that the release puts the Fed's tapering on hold.

Weak retail sales = more evidence of sluggish Q2 growth = less likelihood of Fed taper sooner vs. later. I'm taking the over. #econ $

— Aaron Task (@aarontask) July 15, 2013

Fed Tapering On Hold

Following the release, Barclays lowered its second quarter GDP tracking estimate to a mere 0.5 percent from 0.6 percent. Also, Goldman Sachs lowered its second quarter forecast to 1.3 percent to 1.6 percent. This forecast is well below the consensus estimate of 1.6 percent but still shows that estimates are on the way down, not up.

The news, as Task and Barclays are hinting at, points to a growing consensus that the market may be getting ahead of itself in deeming September as the pre-set date for tapering. Recent economic data has shown a slowdown in growth and at least a slower rate of improvement in general economic conditions from the first quarter. Should this trend continue, it would surely serve to taper the talk of tapering.

Speeches this week from Federal Reserve Chairman Ben Bernanke Wednesday and Thursday on Capitol Hill should provide further clarity, or lack thereof potentially, a to the current consensus on tapering. As Bank of America wrote last week, despite potential disagreements among members, so long as the Chairman, Vice Chairwoman Janet Yellen, and New York Fed President William Dudley still support easing, the rest of the FOMC will fall in line; and so far, all three have shown commitment to continued easy-money policy.