U.S. retail sales increased by 9.2% year-on-year in the first two weeks of June, with resilient consumer spending supporting interest rate hike expectations.

⑴ According to Redbook data, U.S. retail sales for the week ending June 13 increased by 9.4% compared to the same period last year. Overall retail sales in the first two weeks of June grew by 9.2% year-over-year, indicating that U.S. consumer spending continues to maintain strong growth momentum. ⑵ The release of this data comes as markets widely expect the European Central Bank to raise rates further, while federal funds futures pricing shows a 99% probability that the Federal Reserve will keep rates unchanged at the June FOMC meeting, signaling a continued divergence in monetary policy paths across the Atlantic. ⑶ Combined with a sharp decline in oil prices recently (Brent has dropped to a three-month low) and a 15% plunge in Russian refined oil exports tightening supply, the boost to consumer purchasing power from lower energy costs is starting to show, which may partly explain retail data outperforming expectations. ⑷ Strong retail growth, coupled with uncertainty on the energy supply side, presents an even more complex trade-off for European and U.S. central banks between fighting inflation and preventing a secondary inflation wave. Attention will follow whether consumption data can remain at high levels and its potential transmission to terminal rate expectations and the long-term bond yield curve.