Last month, the market was treated to a flaming hot read on US retail sales, which were boosted in January by stimulus checks (or “stimmy,” as the payments are affectionately known on social media).
BofA (among others) pointed to that print as a harbinger — a preview of things to come as more stimulus is injected into the veins of the US economy just as mass vaccinations allow the services sector to reopen for the summer.
“The epic January 2021 retail sales [data is an] absolute game-changer,” BofA’s Michael Hartnett declared, citing a hot early-1994 nonfarm payrolls report as a possible historical analog. Two weeks later, the February jobs report suggested the labor market may be on the mend in earnest, and according to various media reports, millions of Americans will receive their new stimulus checks this week.
That, in brief, was the setup for February retail sales which came in markedly below expectations. The headline print showed a 3% decline, compared to the relatively pedestrian 0.5% drop the market expected. That said, January’s already scorching headline was revised considerably higher, to 7.6%, the third-highest read on record (I think) and the highest outside of the months following the initial pandemic lockdowns.
The 3% decline matched the most pessimistic guess from 71 surveyed economists.
The ex-autos print was a big miss. The market was looking for a small gain and got a 2.7% decline instead. The control group posted a 3.5% MoM drop versus expectations for a 0.6% decline. Only two categories rose MoM compared to 13 in January.
January’s big beneficiaries were February’s hangover, if you will, but pretty much everything declined. The YoY comparisons are flattering, but that’s not entirely surprising.
The largest MoM drop came at department stores, which also posted the largest MoM gain in January. Sales fell almost 2% at electronics and appliance stores from a blockbuster showing the previous month.
In all likelihood, the market won’t care too much about this. For one thing, the big upside revisions to January’s report serve as an offset. January’s control group print was revised up to 8.7% from the initial 6% read. Additionally, this is probably one time when blaming the weather isn’t a dubious cop-out.
But the real “offset” is, of course, “stimmy” and the imminent disbursement thereof.
“While marginally disappointing, the data was arguably stale even before it hit the tape as the latest round of direct payments continue to make their way to domestic consumers,” BMO’s US rates team said.
