The road ahead for the consumer is going to be rough – CIBC

CIBC is out with a note on today’s US retail sales report and they’re not impressed.

They note the soft ‘control group’ reading and possible pull-forward spending as a mirage. Later in the year, slower population growth could lead to weakness.

“The road ahead for the consumer is going to be rough,” CIBC writes.

They note that liberation day has been somewhat walked back but rates are still much higher at around 15% compared to 3% tariffs before.

“Many businesses have been managing these first few months through inventories and
absorbing some of the tariffs, but that is starting to change. Major retailers are starting to report price hikes for May
and the summer,” they write.

That echos what Walmart said today, as it plans to raise prices in May, as tariff-affected merchandise arrives.

“The magnitude and speed at which these prices are coming to us is somewhat unprecedented in history,” said CFO John David Rainey.

CIBC sees some paths to a boost in consumer sentiment but they’re narrow.

“The mood is more cautious, sentiment is low and markets are on edge with an administration seeking
to make drastic changes to international trade and finance even if more methodically now. Fiscal policy could turn
more supportive and lift spirits, but the rates market might cut into some of that benefit if it does come. All in all, we
expect tariffs and the sentiment shock to bring consumption growth to slow to around 1-1.5% in the second half of this
year.”

This article was written by Adam Button at www.forexlive.com.