Never short the hedonism of the US consumer

Daily update

Markets seemed surprised that US December retail sales were stronger than expected. This is weird—some part of US retail sales data surprised positively every single month during 2023. Never go short the hedonism of the US consumer. The Federal Reserve’s Beige Book suggested leisure travel also benefitted. However, unlike 2021/22 this spending is unlikely to be indifferent to prices— but instead to be a response to price discounting.
The US consumer is important in preventing a soft economic landing from becoming a hard economic landing. This data is still consistent with a soft landing this year. However, a soft landing requires a neutral monetary policy (stable real interest rates), not monetary stimulus—which makes the more extreme bets on US rate cuts unlikely.
We get the account of the December ECB meeting. The ECB’s sluggish decision-making suggests it may cut rates after the US. ECB President Lagarde is speaking today. She did of course speak yesterday. Twice.
The Bank of England credit conditions survey is worth a glance, as this will be a useful input into the timing of interest rate cuts. Credit concerns extend beyond bank lending, including things like “buy now, pay later” schemes.