US retail sales preview: Will falling gas prices help or hurt retail sales?

When will US retail sales figures for August be released?

The Census Bureau will release the August US retail sales report at 8:30am ET (12:30 GMT) on Thursday, 14 September 2022.

What are traders expecting from US retail sales?

Traders and economists are expecting headline retail sales to decline by -0.1% m/m, with the core (ex-auto) reading expected to be flat (0.0%) m/m.

US retail sales preview

The most salient change for US consumers in August was a steep, double-digit decline in gasoline prices. Obviously, less spending at gas stations will drive down the headline retail sales reading all else equal, but consumers likely redirected those savings at the pump to other areas. For that reason, the retail sales control group (which excludes gasoline, autos, building materials, and restaurants) will be closely watched as a gauge for underlying demand.

While gas prices declined in August, broader price indices continued to rise, as this week’s US CPI report clearly demonstrated. Accordingly, traders would be wise to look at the unit volume of goods sold to gauge the sustainability of the US consumer moving forward, rather than just the headline figures that may be distorted by price increases.

Finally, it’s worth noting that back-to-school season was in full swing through the month of August, and with effectively all schools back to in-person classes this year, there may be a slight boost over last year’s figures, where some students and school districts opted instead for remote learning.

Technical view: USD/CAD

Looking at the potential impact on markets, the US dollar is edging lower today after yesterday’s big surge on the hotter-than-expected US CPI print. When it comes to USD/CAD, rates are pulling back after testing key previous resistance at 1.3200. If we see a strong US retail sales reading, it would increase the Fed’s confidence in the underlying economy and could even tip the central bank toward a 100bps (1.00%) interest rate hike next week, potentially taking USD/CAD above the 1.3200 barrier. Meanwhile, a softer reading could raise fears that the central bank will overtighten the economy into recession next year and could see USD/CAD drop back below 1.3100 toward the mid-1.3000s to close the week:

Source: TradingView, StoneX