US retail sales were unchanged in April, data out Friday showed. Consensus expected a 1% gain.
The disappointing read on consumption comes on the heels of a stimulus-fueled spending spree and may serve to dampen the “boom” narrative just as concerns over rising consumer prices take center stage. March’s blockbuster gain was revised higher.
Ex-autos, sales fell 0.8% last month. The market wanted a 0.6% gain.
The control group missed too, dropping 1.5% against expectations for a relatively tame 0.4% decline.
It’s not terribly difficult to spin a dour narrative. Clearly, figures for January and March were bolstered by stimulus checks. Lackluster reads for February and April suggest the US consumer is unwilling (or unable) to spend absent the disbursement of free money. On top of that, you could argue that surging consumer prices were a further impediment. And don’t forget about April’s underwhelming jobs report.
That all has a stagflationary vibe to it, and I imagine some folks will be keen to run with that story. Perhaps it’s a semblance of true. But it could be that consumers bought what they wanted (or needed) in March with their stimulus checks and simply took a breather in April.
“This is consistent with our notion that much of the upside from fiscal stimulus has been front loaded into the first quarter,” BMO’s US rates team said.
Meanwhile, import prices rose 0.7% MoM, slightly more than expected. The YoY print was 10.6%, also a bit hotter than consensus.
On balance, I doubt the above actually changes anything. Americans are still purportedly sitting on “excess savings,” which are expected to drive consumption over the summer as the economy reopens in earnest.
That said, there’s an argument to be made that those with the highest marginal propensity to consume aren’t actually sitting on large savings buffers. And if they are, rising prices could eat into them in a hurry.
Boomers retiring in droves and millennials/Gen Z choosing not to have kids, rents and housing costs through the roof (see what I did there), technology continuing its relentless job-destroying march — does anyone really think we’ll see 3% GDP growth in 2023 and beyond?
This morning’s print is further evidence that the reopening will proceed but with fits and starts. It also shows that the FOMC is wise to maintain their stance of waiting to see actual numbers and evidence and not trying to be proactive. They want to be a little late rather than early in pulling back on monetary largess. The risk folks is mainly to the downside for the economy- if the Fed is wrong they can easily cut back on Q/E and raise short term rates. If the economy sinks again it is a lot harder for them to use what tools they have to fix things. It is a risk management approach that seems to make sense. I have a lot of respect for Summers, Dudley et al but in this case, my best guess is that the Fed is wise to adopt their stance.
I have far more confidence and trust in Yellen and Powell than Summers and Dudley, whose recent “effort” I found to be pretty bizarre and unhinged…