Growing but slowing remains the RoC meme with respect to Retail Sales (and the domestic macro data more broadly) as organic improvement struggles in its attempt to summit the steep and successive cliffs of lost stimulus support, a paused fiscal impulse amidst pervasive political acrimony, emergent structural damage to the domestic labor market, a multi-front natural disaster onslaught, rampant political uncertainty and rising prospects for an election related constitutional crisis.
As we highlighted in previewing the data yesterday …. the combination of stimulus payments, enhanced U.I. benefits and WFH/lockdown initiatives all served to support/divert household spending towards Goods Consumption (Retail Sales). This morning August data offers some early insight on the extent to which consumption re-normalization is materializing and whether here-to strength in collective domestic consumerism can hang in in the face of reduced unemployment outlays, full exhaustion of PPP support funds, fading labor market gains, a rolling expiration in forbearance programs.
The short answer is ‘kind of’, hanging in that is.
The sequential gains continue to moderate and while Headline Sales accelerated modestly on a Y/Y basis, Control Group sales actually fell M/M while decelerating Y/Y. Moreover, the Headline and all the subaggregates missed estimates … and against negatively revised July estimates.
The positive here is that a discrete deterioration didn’t materialize and, alongside still plodding improvement in Services Consumption, suggests the Household Spending recovery remain largely intact.
The (large) caveat to the recovery optimism and extrapolation is that improvement is slowing and the risks/impacts associated the various income and activity cliffs highlighted above are really only beginning to take shape now and, should they propagate, would emerge more conspicuously over the coming month(s).
The Data:
- Headline = +0.6% M/M and accelerating +20bps to +2.6% Y/Y with Auto’s/Gas/Building/Clothing(back to school) supporting the headline.
- Control Group (gdp input) = -0.1% M/M and decelerating -30bps to +7.2% Y/Y.
