Never underestimate the U.S. consumers want to spend. Well some of them at least. Last month’s retail figures exceeded expectations – up 1.7% YoY in nominal terms (not adjusted for inflation). But here’s the important point – these are nominal sales and only one month of data. One month is not overly helpful. When averaged over one quarter (which helps remove noise) – adjusted for inflation ( real terms) – and assessing the year-over-year change – growth is negative. And they have been negative in real terms for 9 straight quarters… this matters.
"Consumer Spending"
Market Rallies on ‘Strong’ Retail Sales / Soft Landing
This week we received advanced retail sales for the month of July. From mine, this is one of the more important data points – as it sheds light on what we see with the relative health of the consumer. With spending making up 70% of GDP – any signs of slowing serve as a warning. Advanced retail sales accelerated 1.08% on the month – adjusted for seasonality but not inflation. Economists had been looking for a 0.3% increase MoM. However, June sales were revised to a decline of 0.2% after initially being reported as flat. As regular readers will know, it’s virtually impossible to glean anything from a nominal data point when viewed month-over-month. And whilst the media (and stock market) could not get over how ‘strong’ the data was – I would warn against jumping to conclusions.
Real Retail Sales Continue to Warn
When I caught the headline “retail sales hold up in June – better than expected” – I was curious to read the detail. Yes, it’s true that nominal sales were flat MoM. But that’s not what it states. They don’t mention “nominal”. As analysts and investors – nominal values are of very little use. What helps us more when forecasting trends (and assessing risks) is real sales. Real retail sales are those adjusted for inflation. And with inflation stubbornly high ~3.0% year-over-year (approximately) – that makes a big difference. When viewed through this prism – real retail sales have been declining for months.
For a full list of posts from 2017…