“I’m not dead yet!”, shouted the US consumer.
Retail sales rose more than expected in January, perhaps allaying some fears of a sharp slowdown in spending across the world’s largest economy which, like me during the Balvenie years, lives and dies by consumption.
Sales rose 3.8% in January, nearly double consensus (figure below). The range of forecasts, from six-dozen economists, was 0.3% to 5.5%.
December’s already poor showing was revised lower still, to a 2.5% drop. But fears of Omicron spillover into January were apparently misplaced, although as ever, you’re reminded that these figures aren’t adjusted for prices.
The ex-autos print was a large upside surprise. At 3.3%, it was more than triple estimates. The control group rose 4.8%, an anomalous beat — consensus there was 1.3%.
“On net, while the December revisions slightly moderated the upside surprise, these are still solid figures that show little evidence of an Omicron impact and start Q1’s consumption off on strong footing,” BMO’s Ian Lyngen remarked. One Bloomberg blogger called the control group beat “unthinkable.”
This doesn’t line up particularly well with dour reads on consumer sentiment. The preliminary print on the University of Michigan gauge for February showed Americans are very concerned about the impact of inflation on their financial prospects.
That’s not to suggest that one or the other (i.e., sentiment surveys or retail sales reports) “must be wrong,” it’s just to say that Americans aren’t exactly known for discipline when it comes to their spending habits. In that regard, the apple has fallen (very) far from the tree considering the pretensions to prudence harbored by many of the country’s earliest European invaders settlers.
The read-through for risk assets was ambiguous. There’s a “good news is bad news” dynamic in play, given that robust spending data suggests fears of a slowdown may be overdone, which in turn gives the Fed carte blanche to proceed with aggressive tightening. On the other hand, recession worries are now pervasive enough to “matter,” so evidence that a downturn isn’t imminent is risk-positive.
I’d note that sales at food services and drinking places fell 0.9% last month after a 0.6% drop in December. That may warrant some caution on the services side of things.
Still, you’d have to put some effort into it if you wanted to spin the numbers as somehow consistent with recession warnings. I’m not sure it’s possible. But someone probably tried.
As our Dear Leader suggests, the correlation between Consumer Confidence surveys and actual retail spending is rather low. As it has been for quite a while.