✅ Written by Austin DeNoce, Markets Reporter, Walk-On Holdings

✅ Edited by Casimir Stone, Creative Director Walk-On Holdings

For the Third Week In June, the Markets Will Be Watching…

……for clues to the health of the American consumer in May’s retail sales report, due Tuesday, June 18. 

America runs on spending. Consumer spending accounts for a whopping two-thirds of U.S. GDP. So, when you stop swiping your credit card, the economy stops growing. 

That’s exactly what happened in April. Contrary to consensus expectations of a 0.4% rise, retail sales stagnated. The metric remained unchanged on the month, led by a steep decline in sales at nonstore retailers, including e-commerce companies. This suggests consumers are putting away their wallets after a prolonged post-pandemic spending spree, which kept the economy growing at a healthy clip through 2023, even amid historically high inflation and interest rates.

Now, those headwinds seem to be catching up with U.S. households. Q1 2024 GDP estimates were recently downwardly revised to just 1.3%, in large part due to slowing spending and, by extension, sales.

On the bright side, a slowing economy could encourage the Federal Reserve to finally begin cutting interest rates. This past week, the central bank held the federal funds rate steady at a multidecade high of 5.25-5.5% for the seventh consecutive meeting, and its quarterly dot plot forecast was downwardly revised from 3 projected rate cuts in 2024 to just 1. However, a cooler-than-expected Consumer Price Index (CPI) report for May lent credence to Fed Chair Jerome Powell’s remarks that “the evidence is pretty clear that policy is restrictive” and having the central bank’s desired effect. 

If retail sales data shows continued moderation for May, it’s probably not great news for the U.S. economy’s growth. But it also might mean that an interest rate cut is coming sooner rather than later. And, if the cost of borrowing cools, the extra cash saved on credit card interest and car payments could go back to burning holes in consumers’ pockets, fueling the economy further.

Also on the economic calendar…

Monday, June 17

The Empire State Manufacturing Survey for June will take the temperature of business activity across New York state.

It will be a slow week for earnings, but home construction company Lennar Corporation will provide insights into the housing market with its quarterly report.

Tuesday, June 18

Retail sales won’t offer the only peak inside consumer behavior next week. April’s business inventories, a bellwether of consumer demand and another key component of the GDP, is also due. In March, this metric ticked down slightly, in-line with market estimates.

Wednesday, June 19

The National Association of Home Builders’ (NAHB) Housing Market Index, which measures housing prices and homebuilder sentiment, will hand in June’s data. Last month, sentiment declined for the first time since November 2023 as mortgage rates lingered above 7%.

Thursday, June 20

The housing data will continue to pour in on Thursday, with May’s housing starts and preliminary estimates of building permits, along with the usual weekly update to the Mortgage Bankers Association’s (MBA) 30-year fixed-rate mortgage.

In the labor market, initial and continuing jobless claims will come in as well.

The only major earnings of the week are also due, with professional services firm Accenture, Olive Garden parent company Darden Restaurants, and food giant Kroger scheduled to report.

Friday, June 21

The week will end with a peak inside the services and manufacturing sectors by way of S&P Global’s Purchasing Managers’ Indexes.