This AM’s retail sales number offered a bit of a downside surprise, coming in at -0.3% in June against expectations of +0.3%. “Core” retail sales, which excludes a bunch of stuff and correlates with the big consumer spending part of GDP, fell slightly too, leading some GDP trackers to lower their estimates for Q2 GDP. EG, Moody’s lowered their GDP forecast from 3.5 to 3.1%, either of which would of course still be big bounce-backs from the anomalous -0.2% ding to Q1.
So how worrisome is this?
Not very but not none. First, you know my methods, Watson, especially with noisy, high-frequency data like monthly retail sales. If you take year-over-year changes, as in the figure below, you see a significant decline in the growth of total sales, but remember, this is a period when gas prices were dropping fast, and that also drives down the total rate. If you take gas purchases out of the picture, you see yearly sales growth a bit below where it’s been, but not much.
Of course, with gas prices tanking as they did—they’ve since stabilized—I’d have expected sales to head up a bit (note that yr/yr inflation is tracking at about zero in the figure, a function of previously falling energy prices). Instead, savings rates have maybe ticked up a touch, though here too it depends on how much you squint at the data. Still, one thing you don’t see in these or other related data are households spending their gas dividends very freely. Even while consumer confidence has gone up some, this reluctance to spend savings from the pump may reflect concerns regarding the remaining weakness in the job market and the lack of raises.
At any rate, the other thing you don’t see here is anything in the way of inflationary pressures that should lead to itches in the trigger fingers at the Fed.