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When Everyone Spends A Little Less, We All Save A Little More

Weakness in Retail Sales data last Friday is causing a knee-jerk reaction in trading circles.

Against expectations of a flat reading, retailers reported a 0.9% decrease in sales volume in June.  This is the largest reported drop in two years.

As we've discussed before, though, when looking at data trends, we cannot ignore revisions to months prior.  The same report from the U.S. Census showed that May's Retail Sales data was revised higher by 0.1%.

Now, also worth noting is that this month's report shows a margin of error of 0.7%. 

That means that actual sales could have slid by as much as 1.6% or as little as 0.2% -- nobody knows for sure because the reported data is an extrapolation of the readings from a small sample set of all retailers nationwide.

So, in the best-case scenario, last month revised higher by 0.1% and this month showed a 0.2% loss -- a net loss of 0.1%. 

This is a sharp reversal from last month's runaway numbers and should make the inflation-weary (i.e. the Federal Reserve) feel a little more at ease.

Slowing consumer sales reduces inflationary pressure on the economy and that is why we're seeing rates improve this morning.