U.S. economic data has exhibited a seesaw like pattern recently–GDP down, non-farm jobs up, retail sales down. The data moves, but you just end up in the same place!
Friday’s retail sales report was a good example. The report confirmed recent trends like continued growth in motor vehicle sales, which rose a healthy 1.1% month-over-month, and falling crude oil prices, which can be measured by reduced gasoline station sales. It also exposed broad-based declines in department store, restaurant, grocery and clothing store sales along with those of electronics outlets. Some of the weakness in brick-and-mortar retailers can be explained by continued growth in non-store retail sales (online sales), which were up 1.3% month-over-month. On top of that, Barclays has observed that “some of the softness in July sales came from prices. July producer prices were soft across the board and lower food prices may be responsible for softness at grocery stores and restaurants, which together count for a quarter of overall sales.”
Overall, the retail sales report is important because the U.S. consumer has been the backstop of economic growth, and any restraint in consumption could foreshadow the deceleration of the U.S. economy. Also, if Barclay’s is correct about softer prices, hitting the Federal Reserve inflation targets will prove more difficult. In all, the seesawing economic data prints continue to point to a prolonged timeframe for ongoing accommodative monetary policy. We are still in the same place!
Source: Barclays, Bloomberg News and U.S. Census