You know the story well at this point.
Amidst an existential reckoning for the Services economy and alongside fiscal sponsored bridge financing in the form of direct stimulus and enhanced UI benefits, household consumption was stented almost exclusively in the direction of Goods consumption.
Buttressed by the stimulus driven savings cushion and supported by moderate, progressive improvement in the labor market, Retail Sales summitted the COVID cliff to rarified recovery air, staging one of the more prolific, legit V-shaped rebounds among name brand domestic macro series.
All the while, the balance of risk equation has remained largely fixed.
That is, could the pace of the labor/income gains drive a recovery in underlying, organic consumption capacity at a pace faster than stimulus support and precautionary savings went away?
Thus far the answer has been (a resounding but still tenuous) ‘yes’.
But again, with that savings cushion now being drawn down, enhanced benefits fully rearview, the consumption catchup impulse waning, aggregate activity still depressed, the trend in the high-frequency and alt-data moderating, diminished prospects that the lame-duck can still swim up the stimulus stream and governor’s nationwide pulling the “emergency brake” amidst parabolic COVID case growth, the recovery remains both fragile and precarious.
Indeed, as is again evident this morning with Headline and Control Group Sales missing estimates, September being revised lower and sequential growth (+0.1%) barely holding positive, the momentum is clearly fading.
But is anyone really unaware of the extant risk factor cocktail above and/or expect growth not to moderate somewhat over the next month(s) as the lame-duck virus session awaits the vaccine disbursement inauguration?
Of course not .... do 1-legged (lame) ducks swim in a circle?
Absent further fiscal support or a further, large-scale reduction in the savings rate, the data trajectory and near-term income dynamics suggest the distribution of holiday spending is likely to exude some measure of the same k-shaped complexion and goods-vs-services divergence that has characterized the broader recovery to date.
