There’s been no shortage of evidence lately to suggest many Americans are concerned about the economy as the trade war drags into its 18th month (from the time Trump announced the metals tariffs).
August brought the worst consumer sentiment print of the Trump era, along with poll data that showed more voters think the economy is getting worse than better for the first time since the election. The main risk is that deteriorating sentiment manifests itself in retrenchment by the consumer, who carried the economy in the second quarter and came into Q3 feeling pretty good about things, judging by retail sales, which rose for a fifth consecutive month in July.
That brings us to August’s retail sales print and it’s a solid beat. Retail sales rose 0.4% in August, ahead of consensus, which was looking for a 0.2% gain. The range was -0.2% to 0.6% from 73 economists surveyed.
July’s gain was revised up to 0.8%. The August print marks the sixth straight month of rising sales.
Retail sales ex-auto dealers, building materials and gasoline were unchanged last month, while the control group rose 0.3% MoM in August, in line with estimates.
This would appear to underscore the notion that trade uncertainty and the market volatility that uncertainty has engendered are not yet taking enough of a psychological toll to undermine the resilient consumer. This also reinforces what some say is an unsustainable divide between the manufacturing economy (which is in contraction) and the services sector (top pane).
The news comes as prices could begin to rise after new tariffs (15% levies on more than $110 billion in Chinese goods including many consumer items) went into effect from September 1. Duties on another $160 billion in products were delayed until December 15 and Trump on Wednesday pushed back a tariff hike on $250 billion in Chinese products until October 15 ahead of planned talks between Vice Premier Liu He, Bob Lighthizer and Steve Mnuchin in Washington next month.
With the consumer on his side, Trump may be able to keep the economy afloat headed into an election year.
Still, signs of angst persist. A new poll from ABC out earlier this week showed six in 10 Americans believe the economy is headed for a recession in the next year.
Trump called that “a phony suppression poll”.