Three notable U.S. economic reports hit the wires within the same hour this morning, and they don’t agree with each other. Retail sales grew just 0.2% in June, missing forecasts. Jobless claims fell to a five-week low, beating them. The Philly Fed manufacturing index quadrupled, easily blowing past previous and estimates. None of these numbers tell the full story alone, but together they show an economy cooling in some corners and running hot in others.
Today’s Data Dump: Key Takeaways
- Retail sales rose 0.2% in June, below the 0.3% forecast; May got revised up to a stronger 1.0% gain.
- Gas station sales fell 5.3% in June as pump prices eased, which dragged the headline number down.
- Strip out gasoline, and retail sales rose a healthier 0.7%; the “control group” that feeds GDP calculations climbed 0.5%.
- Jobless claims dropped to 208,000 for the week ending July 11, down 8,000 and well under the 217,000 forecast.
- Continuing claims fell to 1.805 million, and the four-week average slid to 214,250, the lowest reading in weeks.
- The Philly Fed Manufacturing Index rocketed to 41.4 in July from 10.3 in June, crushing forecasts near 13.
- That’s the fastest pace of regional manufacturing growth since November 2021, with new orders and shipments both posting sharp gains.
- The data lands ahead of the Fed’s July 28-29 meeting, where a growing bloc of officials wants to talk rate hikes.
What’s Really Going On With Retail Sales?
Retail sales rose 0.2% in June, according to the U.S. Census Bureau, missing the 0.3% gain economists expected. May’s report got revised higher too, to a 1.0% increase.
Gas station sales fell 5.3% in June as pump prices eased, and since gasoline isn’t stripped out of the headline number, that drop pulled the whole report down. Strip it out, and retail sales rose a healthier 0.7%. The “control group,” which excludes autos, gas, and building materials and feeds into GDP calculations, climbed 0.5%.
Online shopping had a moment. Amazon’s Prime Day and early back-to-school shopping pushed non-store retailers up 1.9% for the month, now running 14.2% higher than a year ago. Auto dealers matched that pace, up 1.9%.
This mirrors April’s report in reverse. Back then, surging gas prices tied to the Iran conflict inflated the headline number. This time, falling gas prices deflated it. Either way, the lesson holds: check what’s driving the headline number before you trust it.
Why the Labor Market Still Won’t Crack
Initial jobless claims fell to 208,000 for the week ending July 11, down 8,000 from the prior week and well below the 217,000 forecast, according to the U.S. Department of Labor. That’s the lowest weekly total in five weeks.
The four-week moving average, which smooths out weekly noise, dropped to 214,250. Continuing claims, which track people still collecting benefits, fell to 1.805 million.
Claims crept higher through late May and June, but they’re heading back down now. Economists call this a “slow hire, slow fire” labor market: companies aren’t hiring much, but they aren’t firing much either. The Fed’s own Beige Book, released Wednesday, described employment gains as modest but positive through early July.
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Why Did the Philly Fed Index Just Go Bananas?
The Federal Reserve Bank of Philadelphia’s manufacturing index rocketed to 41.4 in July from 10.3 in June, crushing forecasts near 13. That’s the fastest pace of regional manufacturing growth since November 2021.
Nearly every part of the survey improved. New orders jumped 10 points to 37.0, shipments climbed 19 points to 33.7, and the average workweek index surged 21 points to 14.0. Manufacturers in the region are busier than they’ve been in years.
There’s a catch. Prices paid by manufacturers rose to 53.9, and prices received climbed 7 points to 27.4. Factories are seeing stronger demand, but they’re also facing higher costs and passing some of it along. Firms still expect growth over the next six months, though some forward-looking measures cooled slightly from last month’s highs.
What Does This Mean for the Fed?
None of today’s reports change the Fed’s timeline much. Chair Kevin Warsh and the rest of the policy committee meet again on July 28-29, and traders are betting they’ll hold rates steady in the current 3.50% to 3.75% range.
Warsh has taken a hawkish tone since replacing Jerome Powell in May, saying inflation is “too high” for his liking. At the June meeting, nine of 18 committee members backed a rate hike by year-end, a sharp turn from March, when nobody wanted one. Cooler June inflation data eased some of those fears, but today’s strong Philly Fed number and a tight labor market hand the hawks fresh ammunition.
Retail sales are the wild card. A soft headline number usually argues for patience, but the strong core reading undercuts that argument. Expect the Fed to stay in wait-and-see mode until next month’s jobs report and inflation data give a clearer signal.
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What Does This Mean for Dollar Traders?
Today’s data batch was a mixed bag for the dollar, but it leaned supportive on net. The soft retail sales print should have weighed on the greenback, but strong jobless claims and a strong Philly Fed print offset it, and the dollar firmed slightly on the day.
Don’t expect fireworks from this data alone. None of today’s numbers were surprising enough to force traders to rethink the Fed’s path in a big way. The bigger catalyst is still two weeks out: the July 28-29 FOMC meeting, plus whatever Warsh says afterward.
Watch the background risk too. The U.S. reinstated its naval blockade on Iran on July 14 amid renewed friction over the Strait of Hormuz. If gas prices reverse the drop that dragged down June’s retail sales, the next report could tell a different story, and so could the inflation conversation the Fed is having.
Frequently Asked Questions About Today’s U.S. Data
Why did retail sales miss forecasts in June?
Retail sales rose 0.2% in June versus a 0.3% forecast, mostly because gas station sales fell 5.3% as pump prices eased. Strip out gasoline, and sales rose 0.7%. The miss reflects cheaper gas, not weaker shopping.
What do jobless claims tell forex traders?
Jobless claims measure how many people filed for unemployment benefits for the first time in a given week. A lower number signals a healthier labor market, which typically supports a currency because it points to a stronger economy and steadier interest rates.
Why did the Philly Fed index jump so much?
The Philly Fed index measures manufacturing activity in the Philadelphia Federal Reserve district. It surged to 41.4 in July from 10.3 in June as new orders, shipments, and hours worked all jumped, marking the fastest regional factory growth since late 2021.
Will today’s data change the Fed’s next move?
Probably not by much. The Fed already leans hawkish under Chair Kevin Warsh, and today’s mixed results, soft retail sales against strong labor and manufacturing data, don’t give policymakers a clear reason to shift course before their July 28-29 meeting.
What’s the biggest risk to watch going forward?
Energy prices. The U.S. reinstated a naval blockade on Iran on July 14 amid renewed tension over the Strait of Hormuz. If gas prices climb back up, it could reverse the trend that held back June’s retail sales and complicate the inflation picture.
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