Even as the US manufacturing sector joined the rest of the world in a factory slump starting in August, the consumer continued to show up for Donald Trump.
Despite a grievous late-summer slide in consumer sentiment, retail sales posted a better-than-expected 0.4% gain for the month. It was the sixth straight month of rising sales, and it helped make the case that manufacturing recession or no, the US consumer could be relied upon to help prolong the expansion.
Well, on Wednesday, there was bad news. Retail sales fell 0.3% in September, data showed. Not only is that a horrible miss versus consensus (which was for a 0.3% rise), it’s triple the most pessimistic estimate (i.e., on the downside) from 69 economists.
August was revised up to a 0.6% gain.
The control group was unchanged for the month. The ex-autos print was a gain of 0.1%.
Ultimately, we now have the first monthly retail sales decline since February. Coming as it does amid lingering fears that the factory slump evidenced in the worst ISM manufacturing print in a decade isn’t just a “false alarm” when it comes to being a recession coal mine canary, this isn’t the best news. You’re reminded that despite August’s robust retail sales figures, personal consumption posted the most meager gain in six months.
Still, subdued inflation expectations and income gains should afford consumers the capacity to spend if they choose, but as we saw in August, the incessant barrage of trade headlines and the fact that Fed cuts can backfire if they prompt recession fears, means the news flow likely needs to improve to ensure 2019 doesn’t witness a lackluster holiday shopping season.
But hey, it should be fine. It’s not like there are tariffs on consumer goods scheduled for December or anything…