US retail sales were considerably more robust than expected in June, data out Friday showed.
Sales rose 0.6% last month, the government said. The market expected a 0.3% decline. The range, from six-dozen economists, was -2.2% to 0.5%, so the headline print was better than the most optimistic guess.
May’s decline was revised lower, though, which may take some of the shine off last month’s upside surprise. The y-axis in the figure (below) is trimmed for ease of use now that stimulus-fueled distortions are in the rearview.
Ex-autos, sales rose 1.3%. That was dramatically better than the 0.4% increase consensus expected. The control group rose 1.1% in June.
At this point, you can pretty much write your own script (choose your own adventure). Solid retail sales could be construed as a negative development if you’re inclined to a “good news is bad news” interpretation vis-à-vis Fed policy. That is, if you think robust spending is more evidence to support the contention that the world’s largest economy has made “substantial further progress.”
On the other hand, it’s nice to see spending holding up despite surging consumer prices. That may indicate resiliency and otherwise underscore the narrative that says Americans aren’t particularly price sensitive right now given “excess savings” accumulated during the pandemic. It could also suggest there’s more scope for producers to pass along higher input costs.
Sales rose at electronics and appliance stores in June, as well as at clothing shops and food services and drinking places. Sales of helmets, bats, flutes, saxophones and books (my humorous description of the sporting goods, musical instruments and book stores category) fell, as did furniture sales.
If you want to make the case that policy accommodation is no longer necessary (or that additional fiscal stimulus isn’t needed), you could point to the simple visual (above) which just shows that retail sales are now well above pre-pandemic levels.
I’m not particularly fond of that argument. There’s definitely something to say for monitoring retail sales as a sign of economic “overheating” and therefore as a precursor to inflation (i.e., “too much money chasing… yada yada yada”). But there’s something at least a bit disingenuous about tacitly pretending that retail sales are somehow akin to, say, the labor market. I’m not sure it makes much sense to say there’s “too much” buying and selling going on or, relatedly, that manufacturers are producing “too many goods.” Sure, we can monitor indicators of consumption and production for evidence of an overheating economy, but all else equal, it’s not obvious why we should be irritated by robust retail sales.
It’s worth noting that some of the money distributed under the expanded Child Tax Credit will invariably go towards back-to-school purchases as children return to in-person learning later this year. That would be another boon to retail sales and thus to the economy more generally.
Republicans don’t like it. Marco Rubio on Thursday decried the Biden administration’s monthly payments to families, which many recipients described as a godsend. “[Biden] has transformed the pro-worker, pro-family Child Tax Credit into an anti-work welfare check,” Rubio said, in a comically absurd statement.
By contrast, Cory Booker reminded Americans that the US “is dramatically behind its industrial peers in investing in children.” That’s actually an understatement despite Booker’s use of the word “dramatically.” In fact, America is an outlier among rich nations (figure below).
What you see illustrated in that chart is nothing short of an embarrassment. Independent analysis shows that Biden’s plan will dramatically reduce childhood poverty in America.
But if you ask Rubio, sending monthly checks to families with children “certainly isn’t pro-family.” Go ahead and laugh. Or cry. Because that’s a direct quote.
Rubio would have Americans believe that checks sent to families are anti-family. For the GOP, the sky isn’t blue, grass isn’t green and on January 6, 2021, a large group of civic-minded patriots went sight-seeing in D.C., then conducted a calm tour of the nation’s Capitol.
“No one should be fooled,” Rubio went on to say, of the monthly payments.
Don’t worry “Little Marco,” they won’t be. Undereducated Americans will believe damn near anything you tell them these days, including some of the wildest conspiracy theories ever foisted on the voting public. One thing they probably won’t believe, though, is that free money is bad when they’re the ones receiving it.