Retail Sales Improved Last Week. Or Did They?

When consumers spend, it makes most everyone in business and economics happy. That money drives almost 70% of GDP. There’s money for products and services, businesses do better, and CRE eventually gets its share.

When the news of better-than-expected retail sales in June—1.0% in June, compared to -0.1% in May—stocks took a jump. “Spending was broad based and not just boosted by more money spent on gasoline,” Jeffrey Roach, chief economist for LPL Financial, said in emailed comments. However, things are more complicated.

For one, the Census Bureau, which released the figures, noted, as it does in almost every similar type of release: “The 90 percent confidence interval includes zero. There is insufficient statistical evidence to conclude that the actual change is different from zero.”

Maybe there was an improvement, maybe not.

The numbers were “adjusted for seasonal variation and holiday and trading-day differences, but not for price changes,” the agency said. And price changes, which are part of inflation, have been particularly strong. Was the growth organic and additional things purchased or a result of everything becoming more expensive/? Hard to tell.

There was also more. “The report was not all rosy,” Roach added. “The decline in department store sales may suggest that consumers are spending less at name brand places and going over to discount retailers as we have recently heard that major discount chains are expecting accelerating growth.”

Sal Guatieri of BMO Capital Markets also made the dismal observation that “padded by high savings and rising wages, American households are spending nearly as much money as they did earlier, but largely to keep up with higher prices, not to actually buy more stuff,” he said in a note that was reported by Bloomberg.

Then came other bits of news. “Industrial production was softer than expected in June, declining 0.2%, and output for May was revised lower,” wrote Oxford Economics. “Manufacturing output fell for a second straight month, with production of both durable and nondurable goods declining. … This report is another indication that the economy is losing momentum.”

“With consumer demand for goods softening and inventories much higher than in late 2021, many manufacturers are throttling back in preparation for weaker sales ahead,” Bill Adams, chief economist for Comerica Bank, said in emailed comments. “The dollar’s appreciation is also an increasing problem for manufacturers, since it makes it harder to price exports competitively. High shipping costs limited price competition from imported goods in 2021 but shipping costs are falling and delivery times accelerating, which will increase import competition in the next few quarters.”

The University of Michigan’s survey of consumer sentiment showed consumers still at lower levels of confidence, “remaining at near all-time lows,” wrote surveys of consumers director Joanne Hsu. “Current assessments of personal finances continued to deteriorate, reaching its lowest point since 2011. Buying conditions for durables adjusted upwards, owing both to consumers who cited easing supply constraints and those who believed that one should buy now to avoid future price increases, which would exacerbate inflation going forward.”

So, there are still significant signs that things are far from fine and better on happy and freely spending, consumers is premature.