Retail Sales Miss May Be Coal Mine Canary For US Recovery

Retail sales, one of the few top-tier economic indicators to stage a “real” V-shaped recovery, missed estimates for August, data out Wednesday showed.

The increase for last month came in at just 0.6%, far below the 1% rise consensus expected. The range was 0.2% to 4.6% from 78 economists.

This appears to be an across the board miss. Ex-autos rose 0.7%, missing estimates and the control group posted a 0.1% decline against expectations for a 0.3% gain.

Note that while monthly change charts can be a powerful visual aid when you’re attempting to make a political point, they often betray you when you need them most.

Unlike most other marquee data outside of the housing market, retail sales did recover pre-pandemic levels fairly quickly. But the “V” is losing momentum. Things are leveling off.

This comes as Congress persists in pre-election brinksmanship vis-à-vis another virus relief bill, which is either dead or still possible depending on who you talk to and when.

Extra federal unemployment benefits are running out for early adopters of the program authorized under Donald Trump’s executive orders last month, and although the labor market has recovered around 50% of its pandemic losses, jobless claims are still running well above anything seen pre-COVID.

Common sense dictates that generous government transfer payments helped prop up consumption over the summer, although the likes of Target insisted that anomalous comps weren’t totally attributable to stimulus.

With permanent job losses rising and supplementary unemployment assistance rolling off, one might expect the American consumer to drop the baton at some point over the next several months.

“The challenge is whether the rest of the economy can pick up the slack now that the marginal growth from consumption is going to slow”, Bloomberg’s Cameron Crise wrote. “And whether retail sales can maintain a growth trajectory if the labor market starts to wobble”.

At the risk of putting too much emphasis on a single data point, August’s retail sales numbers could be seen, in retrospect, as the first in a string of confirmatory data points when it comes to validating the contention that the “easy” gains are now over.