US August Retail Sales Preview: Spending May Rebound; How Will US Stocks, the Dollar, and Gold Move Ahead of the Fed Decision?

TradingKey - The U.S. is set to release its August retail sales data on Wednesday (September 16) Eastern Time. Following a noticeable cooling in consumer spending in July, the market expects August retail sales to resume growth. As the Federal Reserve will announce its September interest rate decision just hours after the release, this retail sales report will not only reflect the resilience of U.S. third-quarter consumption, but could also influence market expectations regarding the Fed's subsequent rate path.

July Consumption Cooled Significantly, Will August See a Rebound?

Based on July data, US retail sales fell 0.6% month-on-month in July, compared with prior market expectations for a slight gain. Among the categories, sales at non-store retailers, motor vehicle and parts dealers, and gasoline stations all registered declines, while the retail sales control group also slid month-on-month. Amazon moved its Prime Day promotion forward to June this year, pulling forward some online spending and causing a noticeable pullback in non-store retail sales in July. Consequently, given the lower base and the normalization of some spending activity, a rebound in headline retail sales in August would come as no surprise.

The market currently expects US retail sales to grow by approximately 0.8% to 0.9% month-on-month in August, a marked improvement from the 0.6% decline in July. Core retail sales excluding automobiles are expected to rise by about 0.5%, while the retail sales control group—which is more closely linked to the calculation of goods consumption in GDP—is projected to increase by around 0.4%. If the actual figures come close to market forecasts, it would imply that the pullback in consumer spending in July was primarily a short-term fluctuation rather than a persistent deterioration in household expenditure.

However, this data still needs to be evaluated alongside price factors. US retail sales are reported in nominal terms and are not adjusted for inflation. As energy prices rose in August, higher gasoline prices may have boosted sales at gas stations; thus, even if headline retail sales rebound significantly, it does not necessarily indicate a corresponding increase in real consumption volume.

For investors, key points to monitor are whether headline retail sales meet market expectations of 0.8% to 0.9% and whether figures excluding auto sales and the control group rebound in tandem. If all three indicators exceed expectations simultaneously, it will further demonstrate that US consumer spending remains resilient; if headline data is propelled by energy prices while the control group shows weakness, the improvement in consumer spending fundamentals may be relatively limited.

How Will August Retail Sales Data Impact US Stocks, the Dollar and Gold?

In terms of U.S. stocks, if August retail sales come in significantly higher than expected while core sales and the control group also remain strong, it will demonstrate that U.S. consumer demand remains resilient, providing support for earnings expectations in cyclical sectors such as retail, consumer, travel, and financials. However, against the backdrop of already high Fed rate-hike expectations, overly strong data could also drive U.S. Treasury yields higher and boost market expectations for subsequent rate hikes, thereby pressuring tech stocks and other high-valuation growth stocks.

By contrast, data that comes in slightly above expectations without noticeably reinforcing rate-hike expectations may be more favorable for overall U.S. equities. If retail sales fall significantly short of expectations, interest rate pressures may ease, but the market might also reassess the outlook for U.S. consumption and economic growth. Therefore, the impact on U.S. stocks will depend on whether the valuation support from declining interest rates can offset the pressure from downward revisions in earnings expectations.

As for the U.S. dollar, if retail sales, core sales, and the control group all beat expectations across the board, it will further indicate that the U.S. economy can still withstand higher interest rates and increase the Fed's room to maintain tight monetary policy going forward. Consequently, U.S. Treasury yields could find support, presenting the potential for the dollar to strengthen further in the short term. Conversely, if the data falls significantly below expectations—especially if the control group shows consecutive weak performances—the market may lower expectations for subsequent rate hikes, thereby pushing down U.S. Treasury yields and the dollar.

Gold Price Daily Chart, Source: TradingView

For gold (XAUUSD), the impact of retail sales on gold is mainly transmitted through the U.S. dollar, U.S. Treasury yields, and Fed interest rate expectations. If August data is significantly stronger than expected and prompts the market to raise the probability of future rate hikes, the U.S. dollar and U.S. Treasury yields may rise further, leaving the non-yielding asset gold under short-term pressure and potentially opening downside room toward $4,000. If the data falls short of expectations, it could lower expectations for further rate hikes and drive down the U.S. dollar and U.S. Treasury yields, providing conditions for a rebound in gold prices to potentially test the resistance level near $4,510.