economic

July Increase in Retail Sales Continues Recovery from Coronavirus Pandemic

Posted on by katiecmorgan

WASHINGTON–(BUSINESS WIRE)–Retail sales continued to recover from the impact of the coronavirus pandemic in July, growing more slowly than the month before but adding to the strong turnaround seen since this spring’s declines, the National Retail Federation said today.

“Retail sales for July were another positive step in the right direction as our economy continues to slowly reopen”

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“Retail sales for July were another positive step in the right direction as our economy continues to slowly reopen,” NRF President and CEO Matthew Shay said. “Americans are showing their continued resilience and willingness to spend in the face of this unprecedented pandemic and government actions to date have clearly supported consumers and the economy in this process. Retailers all across the country have demonstrated that their stores and supply chains can be operated safely and effectively for associates and their customers by following established guidelines and protocols. We encourage Congress and elected leaders at all levels of government to enact policies that support consumers and keep the economy open.”

“Retail sales are starting the third quarter on a solid footing considering the nosedive we saw this spring, but we have to remember that there’s uncertainty about economic policy and that the resurgence of the virus is putting pressure on the fledgling recovery,” NRF Chief Economist Jack Kleinhenz said. “While households are spending, they are anxious about their health and economic well-being, so they are being pragmatic. The amount of uncertainty about forecasting is huge as we look toward the second half of the year, and what happens with the economy comes down to what the coronavirus allows us to do.”

The U.S. Census Bureau said today that overall retail sales during July were up 1.2 percent seasonally adjusted from June and up 2.7 percent year-over-year. That follows an 8.4 percent month-over-month increase in June. Retail sales have been climbing after a record monthly drop while most stores were closed in April.

NRF’s calculation of retail sales – which excludes automobile dealers, gasoline stations and restaurants in order to focus on core retail – showed July was up 1 percent seasonally adjusted from June and up 10 percent unadjusted year-over-year. NRF’s results are different from the Census Bureau’s figures because of the categories excluded by NRF.

The July numbers were part of a strong trend: NRF’s numbers were up 7.1 percent unadjusted year-over-year on a three-month moving average and up 4.7 percent for the first seven months of the year.

Just over half of retail categories saw month-over-month gains and three-quarters saw year-over-year increases. The biggest monthly gain came at electronics and appliance stores, which are selling more computers for home offices and online learning because of expected school closings, along with more appliances associated with home improvement spending and higher home sales.

Specifics from key retail sectors during July include:

  • Electronics and appliance stores were up 22.9 percent month-over-month seasonally adjusted but down 2.3 percent unadjusted year-over-year.
  • Clothing and clothing accessory stores were up 5.7 percent month-over-month seasonally adjusted but down 19.6 percent unadjusted year-over-year.
  • Health and personal care stores were up 3.6 percent month-over-month seasonally adjusted and up 3.1 percent unadjusted year-over-year.
  • Online and other non-store sales were up 0.7 percent month-over-month seasonally adjusted and up 25.8 percent unadjusted year-over-year.
  • Grocery and beverage stores were up 0.2 percent month-over-month seasonally adjusted and up 12.8 percent unadjusted year-over-year.
  • Furniture and home furnishings stores were unchanged percent month-over-month seasonally adjusted but up 0.5 percent unadjusted year-over-year.
  • General merchandise stores were down 0.2 percent month-over-month seasonally adjusted but up 3.1 percent unadjusted year-over-year.
  • Building materials and garden supply stores were down 2.9 percent month-over-month seasonally adjusted but up 16 percent unadjusted year-over-year.
  • Sporting goods stores were down 5 percent month-over-month seasonally adjusted but up 18.9 percent unadjusted year-over-year.

About NRF

The National Retail Federation, the world’s largest retail trade association, passionately advocates for the people, brands, policies and ideas that help retail thrive. From its headquarters in Washington, D.C., NRF empowers the industry that powers the economy. Retail is the nation’s largest private-sector employer, contributing $3.9 trillion to annual GDP and supporting one in four U.S. jobs — 52 million working Americans. For over a century, NRF has been a voice for every retailer and every retail job, educating, inspiring and communicating the powerful impact retail has on local communities and global economies.

Stocks are plummeting, but a U.S. recession doesn’t look imminent

Posted on by katiecmorgan

Consumer sentiment has remained strong all year despite political head winds and market jitters.

Washington Post

By Heather Long
December 4
Alarm bells sounded on Wall Street this week as something happened that hasn’t occurred in a decade: The U.S. yield curve inverted. This is one of the most reliable predictors of a recession, and it spooked investors enough to send the Dow down almost 800 points (along with the realization that President Trump’s trade “deal” with China is flimsy, at best).

But this doesn’t mean a recession is happening tomorrow or even in 2019.

Roughly 70 percent of the U.S. economy is powered by consumer spending. As long as consumers are happy and opening their wallets, the economy will keep growing, and right now, consumers are in very good shape.

Here’s what happened Monday: The yield (amount of interest) on the two- and three-year U.S. Treasury bonds moved above the yield on the five-year Treasury bond. Inversion is when a short-duration bond yield is suddenly worth more than a long one.

“A flattening yield curve traditionally has been seen as a sign that investors expect future growth to weaken,” Vincent Heaney, Jon Gordon and Chris Swann of UBS wrote in a client note. “An inverted yield curve is seen by some as an early warning sign of an impending recession.”

[Trump has won little from China so far. There isn’t an ‘incredible’ deal yet.]

As UBS noted, this is an early warning sign, and it could take years for the recession to materialize. Consider that the three-year bond yield moved above the five-year in August 2005, yet the Great Recession didn’t begin until December 2007.

According to many Wall Street analysts, this week’s inverted yield curve isn’t a reason to panic but is another sign that the U.S. economy is probably peaking. Growth is widely expected to slow somewhat next year and even more so in 2020.

How much and how quickly the economy tapers is going to depend on U.S. consumers.

“This is the most confident American consumers have been in 18 years,” said Lynn Franco, director of the team that produces the Conference Board’s Consumer Confidence Index. “Just on holiday gifts, consumers plan to spend around $627 this year versus $560 last year, one of the strongest jumps we’ve seen.”

U.S. household incomes are rising as more people find jobs, and wage growth is at the highest nominal level in nearly a decade. More than 2.7 million more Americans are employed now vs. a year ago, the biggest gain since 2014. In many communities, people see visible signs of the economy’s strength when they view so many “We’re hiring!” signs around town. Franco says good job prospects are a key driver of consumer sentiment.

Consumer sentiment has remained strong all year despite political head winds and market jitters. People appear to be focusing on their own improving financial situations and not the headlines.

“Consumers have been pretty accurate forecasters of a recession,” Franco said. “There is usually a sharp decline in expectations for the future, followed by a decline in how consumers view the present situation.” But she said she’s not seeing that now.

On top of job and wage gains, many Americans have more money in their pockets from tax cuts. The typical middle-class household, earning $49,000 to $86,000 a year, received a $900 tax cut this year, according to the nonpartisan Tax Policy Center. Earlier this year, there were concerns that higher gas prices were eating up a substantial chunk of the tax savings as families had to shell out more money at the pump, but gas prices have fallen sharply in recent weeks and are now at a lower level than they were a year ago, according to the U.S. Energy Information Administration. It’s another factor helping consumers feel better off and making them likely to spend more.

“The recent drop in retail gasoline prices is poised to lift disposable income in the coming months,” said Neil Dutta, head of Renaissance Macro Research. “Disposable income is the main driver of consumption.”

[1 million Americans live in RVs. Meet the ‘modern nomads.’]

The brighter mood and fatter pockets of U.S. consumers are helping boost retail sales, according to Jack Kleinhenz, chief economist at the National Retail Federation. He expects retail sales to grow at least 4.5 percent this year, which would be the largest gain since 2014. His figures don’t include spending on gas or restaurants, so they are a good barometer of how much Americans are spending online or in brick-and-mortar stores.

If there’s a head wind for consumers, it’s debt. Household debt — mortgages, student loans, auto loans, home-equity lines of credit and credit cards — has now topped $13.51 trillion, which is above the previous peak from 2008, just before the worst of the financial crisis hit. Student loans often get the most focus since nearly 1 in 5 adults have some sort of student debt. Experts say it’s a clear hindrance, but they are encouraged that credit card and mortgage debt remain in check this cycle.

“People are using credit in a prudent way. They aren’t loading up on their credit cards,” Kleinhenz said. He pointed out that household debt as a percent of household income is low by historical standards.

An early warning sign could be car loans. Auto loans that are 90 days delinquent just hit the highest level since early 2012, according to New York Federal Reserve data. Auto loan delinquencies have steadily risen in the past six years, even as the economy has improved. It is a likely indication that lower-income Americans are still struggling, even though many states and the nation’s two largest employers — Walmart and Amazon.com — have lifted their minimum wages.

But Dutta of Renaissance Macro Research pointed out that disposable income has been rising 3.1 percent in the past five years while consumption has risen 3 percent, meaning a lot of people are living within their means. Dutta said that is a “dramatic departure” from the late 1990s and early 2000s, when consumption outpaced income by a sizable amount.

This week’s inverted yield curve is a reminder that the economic head winds at home and abroad are picking up. But experts say to watch the consumer for the best gauge on the U.S. economy’s health. So far, most signs point to ongoing strength.