US retail sales sagged in July, closely-watched data out Tuesday showed.
The 1.1% decline was far steeper than the 0.3% contraction consensus expected (figure below).
The range, from nearly six-dozen economists, was -2.3% to 0.4%. June’s 0.6% increase was revised slightly higher.
The ex-autos print for July was also a disappointment. The -0.4% drop compared unfavorably (to say the least) to a projected 0.2% increase. The control group fell 1%.
The underwhelming numbers come just days after the preliminary read on University of Michigan sentiment for August suggested Delta variant concerns and inflation jitters are weighing heavily on consumer psychology.
Optimists hope some combination of excess savings, back-to-school spending and re-opening dynamics will support consumption in the back half of the year, thereby helping the world’s largest economy sustain a robust recovery.
But worries abound. Vaccine hesitancy and surging caseloads across the country may hamper spending, especially in the hard-hit, high-contact businesses which comprise the services sector.
Although employment in restaurants and bars has rebounded, there’s still considerable ground to cover before we can call leisure and hospitality “healed.” Job openings in accommodation and food services rose to 1.44 million as of end-June, the latest JOLTS data showed.
And remember: The Michigan data showed favorable ratings for homes dropped to just 30% this month. For cars, the figure was 31%. For household durables, 43%. Those were all the lowest since the 1980 recessions.
As far as last month’s retail sales, there’s little room for interpretation or spin. “This naturally suggests that consumers have started putting their money where their mouths are, refraining from goods purchases — much like the UMich consumer figure suggested they might,” Bloomberg’s Cameron Crise remarked.
“Aside from the pandemic (i.e., ex-2020-2021), the control group fell by second most since 2009,” BMO’s Ian Lyngen noted, adding that “these figures are in current prices, so when adjusting for the +0.5% gain in CPI during July, the numbers become all the more concerning.”
Against a backdrop of rising prices, consumers are behaving rationally and reducing their spending. Why this is “concerning,” as per Bloomberg, is beyond me.
Exactly, isn’t this the allocation mechanism working as intended?
With necessary cut-backs I managed to get my monthly credit card bill down to $243 last month. What’s left on it? Streaming TV subs, Heisenberg, and food. I work (when there is work) in a lucrative industry, but the phone has not been ringing, so Netflix and Dis+ are on the block if things don’t turn around. Heisenberg stays.
Adjusted July MOM vs June
– Up: restaurants & bars, gasoline, misc store retail
– Flattish: pers care, gen’l merch, elec & appliance,
– Down: autos, furniture, home improv, grocery, apparel, sporting goods etc, e-commerce
The overall is down, -0.4% excluding autos, and sort of looks like shift from big-ticket and stay-at-home stuff to going out and eating out stuff. Interesting that e-com is down quite a bit.
It is one month. If you are voting on the FOMC this should give you some pause. Granted, at some point they should taper, but there is no hurry. If I was a Fed voter, I would want to get past the school reopening, reduced unemployment benefits and see where the virus goes when things get colder up north this fall/winter. So I would be putting together scenarios- and if things worked out well for all, planning to announce a taper in December AT THE EARLIEST!
Aside from that- keep in mind all this is one data point, and there is so much noise out there in the numbers now.