On Thursday local time, the United States will release the monthly retail sales rate for September, which is also the most closely watched data of the week. As a key pillar, the vitality of consumer spending will support whether the U.S. economy can achieve a soft landing. However, recent data shows that inflationary pressures have intensified, consumer confidence has declined, and institutions have downgraded their holiday season outlook. At the same time, the Federal Reserve is also cautious about future policy paths, which may bring uncertainty to a soft landing.

The holiday season is under scrutiny.

Data shows that U.S. retail sales account for more than one-third of all household consumption expenditures, serving as an important barometer of the economy, and the holiday season is the top priority for merchants every year.

As the largest industry organization, the National Retail Federation (NRF) said on Tuesday (15th) that consumer spending during this year's holiday season may reach a new high. However, as consumers continue to grapple with higher prices and consumption habits gradually adapt to pre-pandemic patterns, sales growth may slow down. The organization expects that retail sales between November 1 and December 31 will increase by 2.5% to 3.5% compared to last year, reaching $979.5 billion to $989 billion, lower than the previous year's growth rate of 3.9%.

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NRF Chief Economist Jack Kleinhenz said that the forecast of a slight economic slowdown may be due to demand suppressing consumer goods prices, which could affect retailers' revenues. On the other hand, the shortened shopping time between Thanksgiving and Christmas, as well as hurricanes Helene and Milton in the southeastern United States, may also put pressure on sales.

NRF said that compared to a year ago, discounts may involve more brands and product categories. There are signs that as the holiday season approaches, budget-conscious consumers are shopping more in large online discount events, such as Amazon's Prime Day and similar events held by Walmart and Target. However, the upcoming U.S. elections and the rise in prices of groceries, housing insurance, and other services continue to make shoppers anxious.

NRF CEO Matthew Shay said, "What we are seeing now is an economy - at least in retail - that is returning to normal to some extent, looking more like the pre-pandemic economy in terms of spending patterns and growth." He said that in the first eight months of 2024, retail store sales increased by 3.4% year-on-year, while retail sales generally increased by 3.6% per year before the pandemic.

It is worth mentioning that many companies are feeling the pressure. After experiencing months of weak demand and poor financial reports, Nike decided to "change the guard" and appoint a new CEO. Luxury giant LVMH Group said on Tuesday that after years of exceptional growth after the pandemic, sales have declined so far this year.

Inflation expectations may increase pressure on the Federal Reserve.

The Federal Reserve Bank of New York's consumer survey released this week shows that while one-year inflation expectations remain stable at 3%, the three-year inflation rate rose from 2.5% in August to 2.7%, and the five-year rate rose from 2.8% to 2.9%.The data coincides with the University of Michigan survey from last week. According to the report, Americans' expectations for overall inflation next year have risen from 2.7% to 2.9%. As a result, the consumer confidence index in early October fell from 70.1 last month to 68.9, ending two consecutive months of increases. The current economic situation index dropped from 63.3 in September to 62.7, while the future expectations index fell from 74.4 to 72.9.

It should be noted that the expected credit delinquency rate continues to rise, reaching its highest level in over four years. The New York Fed stated that the average expected probability of debt delinquency over the next three months rose for the fourth consecutive month to 14.2%, higher than 13.6% in August, indicating that the financial situation of some Americans is being tested. Although this perception is highest among households with incomes below $50,000, there is a significant increase among respondents with household incomes above $100,000.

In fact, data released by the Federal Reserve on the 7th showed that consumer credit across the United States increased by $8.9 billion in August, far below the $26.6 billion in July. The annual growth rate of credit fell to 2.1%, significantly lower than the previous month's 6.3%.

Boris Schlossberg, a macro strategist at asset management firm BK Asset Management, said in an interview with First Financial that inflation expectation data is closely watched by Federal Reserve officials because they believe that the outlook for price pressures has a strong guiding effect on prices. Recent external shocks such as hurricanes and company strikes may cause short-term disruptions to supply chains and the job market, thereby disturbing prices, and the Federal Reserve needs to judge the persistence of these impacts.

After starting a new round of easing with a 50 basis point cut, there is considerable disagreement within the Federal Reserve about how aggressively to proceed with rate cuts in the future. Especially with recent data better than expected, it has raised questions about whether the policy is too aggressive. Federal Reserve Governor Waller said that the recent data does not show that the economy is slowing down significantly. "Although we do not want to overreact to these data, I believe that the overall data indicates that monetary policy should be more cautious in the pace of rate cuts than was needed at the September meeting."

Federal funds rate futures show that the Federal Reserve's room for rate cuts this year has been reduced to about 35 basis points, which means that there will be one meeting with no change in the remaining two interest rate meetings. Schlossberg told First Financial that the U.S. economy may be gradually approaching a delicate tipping point, where too rapid easing could lead to a resurgence of inflation, and insufficient policy力度 could threaten a soft landing, especially considering the current complex macro environment. In his view, the Federal Open Market Committee's (FOMC) stance of making decisions meeting by meeting is undoubtedly to avoid policy mistakes and to respond as quickly as possible based on economic data performance.