Economic Data This Week Is Likely to Drive Volatility

This morning, we kicked off a week of high-impact economic data with releases on Retail Sales and Import/Export Prices, and—unsurprisingly—the numbers have already reflected data volatility. Headline Retail Sales for December came in flat at 0.0% month-over-month, well below consensus estimates of a 0.4% increase. Core Retail Sales also printed flat versus expectations for a 0.3% gain, both key measures missing the street’s forecasts.

The Retail Control Group, an important component used in calculating GDP and Personal Consumption Expenditures, also disappointed. This measure strips out more volatile categories such as autos, gas stations, and building materials, and it declined by 0.1% month-over-month compared with expectations for a 0.4% rise. Taken together, these results suggest that consumers meaningfully pulled back on spending in December, leading to broadly weaker-than-expected prints.

On the inflation side, the Export Price Index increased by 0.3% month-over-month, ahead of estimates of 0.1%, while Import Prices rose by 0.1%, matching expectations. These mixed readings set the stage for what could be a turbulent remainder of the week.

More volatility is likely as several high-impact data points are still ahead, particularly Wednesday’s Jobs report and Friday’s CPI inflation release. Expectations for the CPI print show a notable divergence. Consensus currently calls for headline CPI to rise 0.3% month-over-month. However, the Cleveland Fed’s Inflation Nowcasting model is projecting a much softer 0.13% increase for January, well below market expectations. 

If the official data were to align with the Cleveland Fed estimate, equities could see a bullish response as investors begin to price in more rate cuts for 2026 beyond the two currently expected. Adding to the uncertainty is the January Adobe Digital Price Index, which tracks online prices across 18 CPI categories. That measure shows a 4.0% month-over-month increase, the sharpest spike since the index was created. This contrast highlights just how divided the signals are heading into Friday’s release.

With January data historically prone to volatility and seasonal headwinds for equities typically emerging in February, markets are bracing for potential whipsaw price action over the next two weeks. Whether the move is to the upside or downside, this week’s data has the potential to set the tone for the back half of February.

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