Domestic retail sales in China were 1.4% lower than forecast, and industrial output was lower than expected, while vehicle production and sales fell sharply for the 10th consecutive month, according to Reuters. Overall retail sales hit a 16-year low.

This data paints a bleak picture for China as it dovetails with 10 months of US-China trade war; the outlook is down in key sectors not only for exports, but domestically as well, suggesting that Chinese consumers are feeling the effects. It is not presumptuous to think the latest round of tariffs might deepen these losses, but this is April data that does not reflect the recent round of mutual tariffs, so time will tell.

US Retail Sales, Control Down. Flight To Bonds = Rate Cut?

In the US, retail sales overall were down 0.2% in April. Retail control was flat versus a market forecast of 0.3%, a negative indicator for Q2 GDP.

A growing flight to US Treasuries affirms a coming rate cut, but Bloomberg suggests it will need to be drastic to keep inflation, which is lagging, at the 2% target.

If the recent flare-up in the US-China trade war drags inflation lower still, the Fed, which has not yet signaled the need for rate cuts, might be forced to reconsider.

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