Macro Monkey Says
Retail Needs Therapy
Everybody’s always asking, “Where’s the store?” but never, “How is the store?” So, naturally, it’s not hard to see why retailers may have felt a little depressed lately.
Most of the time, you can cure a case of the downbads by hitting the mall, Amazon, or just about anywhere else where you’re encouraged to spend way-too-much cash. This idea of “retail therapy” arguably works a little too well (not that our $25tn economy minds), but after yesterday’s reporting, it’s clear that now it’s retail itself that needs therapy.
Like many others in therapy, on the surface of Tuesday’s Advance Monthly Retail Sales figures from the Census Bureau, everything seemed fine. The 0.4% increase in spending throughout April was a reversal of declines seen in each of the previous two months, yet the 1.6% annual growth rate implies a woeful decline in real retail spending.
Markets seemed to agree. The Big Dawgs of retail in the U.S. did not have a fun lead-in to taco Tuesday dinner yesterday, notably aside from Amazon, who is a certified Big Dawg of anything it’s in. Names including Walmart, Home Depot (who also missed on earnings yesterday morning), Costco, Target, TJX, and plenty of others all underperformed each of the major U.S. indices on the day, suggesting that nerves were flaring up despite a good-on-the-outside broad retail sales report.
There are a few reasons for this. For starters, despite reversing a months-long trend of declines, Wall Street had priced in a ~0.8% uptick in April retail spending.
For the mathematicians in the crowd, that’s 2x the growth in retail spending we actually saw. That alone provides an explanation for the market’s outperformance of those Big Dawg retail names, but the overall story was one equivalent to telling an economist that their dog died.
Most of the declines registered last month can be attributed to things like hobbies, sporting goods, furniture, and other items mostly seen as “wants” rather than “needs.” Gasoline aside, of the 13 categories of retail spending these reports center on, 6 of them were down and primarily consisted of things consumers can more easily forgo when falling into financial hardship.
Not ideal. Slowing spending in “wants” can often precede a similar, but albeit less extreme, slow down in “needs.” This is exactly the kind of news that economists who aren’t betting on a recession hate to see.
Now, loyal ape readers know all too well that consumer spending is the driving force of the U.S. economy, but the thing is that retail spending data is low key a**. When they say “retail,” they mean it, as the Census Bureau excludes from the report items like healthcare, education, professional measures, and more of the economy’s most crucial line items get absolutely 0 representation in the measure.
Revisions in this reading are also frequent. This can often lead to skepticism around a monthly release, but for March at least, this inevitable revision moved in the right direction: from down 1% to down just 0.7%. It might not be much, but it sure is honest work, and we’ll take it…I guess.
|
Sit provident velit possimus corporis neque. Voluptate debitis soluta at ab dignissimos molestiae aut voluptas. Officia quis voluptatum ipsa assumenda quae vel. Dolor repudiandae voluptas voluptates distinctio.
Est accusamus veniam aut voluptas. Possimus assumenda modi facere qui et dolor dolorem. Et facilis est et veritatis recusandae. Soluta molestiae et debitis nostrum ut nulla eius.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...