US Data Double-Whammy: Hot Retail Sales and Rising PPI Complicate Fed Pivot

Economic data released on Wednesday delivered a mixed message to global markets, highlighting the resilience of the US consumer while simultaneously raising red flags regarding sticky inflation. The twin releases from the Department of Commerce and the Bureau of Labor Statistics have forced traders to recalibrate their expectations for the Federal Reserve's monetary policy path in 2026.

Key Data Snapshot

• US Retail Sales: +0.6% (vs forecast 0.4%)
• Core Retail Sales: 0.5%
• Producer Price Index (PPI): 3.0% YoY (vs estimate 2.7%)

Consumer Resilience Meets Producer Price Pressures

The US Retail Sales report for November defied slowdown fears, posting a robust +0.6% month-over-month increase, significantly outpacing the consensus forecast of 0.4%. The data, heavily supported by a rebound in auto sales and holiday spending, suggests that the “soft landing” narrative remains intact despite restrictive interest rates. Core retail sales (excluding autos) also beat expectations, rising 0.5%.

However, the jubilation over economic growth was tempered by the Producer Price Index (PPI), which rose 3.0% year-over-year in November, exceeding the 2.7% estimate. The resurgence was largely driven by a sharp increase in energy costs.

Market Implications

• Monetary Policy: The combination of resilient demand and rising upstream costs complicates the Federal Reserve's position. With the labor market cooling but not collapsing, and inflation showing signs of persistence above target, the “urgency” for rapid rate cuts has diminished.
• USD & Yields: The US Dollar Index (DXY) found support near the 103.50-104.50 zone as yields stabilized. The 10-year Treasury yield is facing upward pressure, hovering near 4.10%-4.25%, as bond markets price out near-term easing.

Technicals

• DXY Support/Resistance: 103.50-104.50
• 10-Year Yields: 4.10%-4.25%

Market analyst commentary suggests that while the “recession” risk is fading, the risk of a “no-landing” scenario—where inflation remains stuck above 2%—is rising. Focus now shifts to the upcoming PCE data later this month to confirm if these producer price pressures are passing through to consumers.