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Lower-Than-Expected Retail Sales in August

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Pre-market activity early this morning appears to welcome the coming press conference from Fed Chair Jay Powell at 2:30pm ET today, buying up into the green across all major indexes. These numbers have been tempered somewhat — and maybe only temporarily — by this morning’s Retail Sales figures for August, released before today’s open.

Both headline and revision numbers for U.S. Retail Sales last month came in below expectations: +0.6% on the headline missed the estimate range of +0.7% to 1.1%, with the July headline number taken down to +0.9% from the +1.2% originally reported. Stripping out big-ticket auto sales (which adds volatility to these numbers month over month), this figure moves to +0.7%, which is within the +0.5%-0.8% analysts were looking for. However, July’s ex-Autos read came down to 1.3% on the revision from the 1.9% reported a month ago.

We also saw a +0.7% read on ex-autos and gasoline sales for August, with the Control number — which gets fed into many other economic metrics — actually came in at -0.1%, where +0.3% had been expected. It’s worth pointing out here that these are advanced figures; the final read on all of these configurations is yet to come.

Looking at the 2020 chart for Retail Sales so far, this is the second-straight month of sub-1% Retail Sales; the spring and early summer months provided a rollercoaster ride of consumer sentiment — from -8.2% and -14.7% in March and April, respectively, to +18.3% and +8.6% in May and June, respectively. Plenty of pent-up demand looks to have been sated through mid-summer, but has apparently begun to peter out during the “back to school” retail climate.

Also worth considering is the lack of federal government stimulus past the original CARES Act, which expired at the end of July. Recipients were still getting government checks, however; the concern looking forward is that consumer confidence — as represented by this Retail Sales data, at least — may continue to shrink as small businesses and families return to concerns about how to pay bills as the coronavirus pandemic rages on in the U.S.

Fed Chair Powell has been instrumental in at least keeping market futures buoyant; while it’s true that “Wall Street is not Main Street,” those of us on Main Street fortunate enough to take advantage of market gains may be somewhat obscured from the fact that the U.S. economy is still in rough shape. Recall we were only just chugging along previous to the pandemic, with U.S.-China trade relations straining both first-world economies. Now that the Fed has pulled out all the stops in keeping the U.S. awash in dollar bills, what will he do for an encore?