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June Retail Sales +0.6%, Better Than Expected

Friday, July 16, 2021

The big economic print this morning — in a week chock-full of them — is June’s Retail Sales number. Results were much better than expected at +0.6%; consensus expectations were for -0.4% on the headline, following a downwardly revised -1.7% headline for May. Similar to other economic reads of late, it appears the U.S. economy is pulling through the impact of higher prices cooling growth. Growth is back, baby!

Analysts had been very keen to see the sub-headline read on Retail Sales: ex-Autos. Expectations there were for +0.4% — essentially flipping the headline estimate — but today’s number was even better: +1.3%. Supply issues with new automobile production, particularly with chip shortages for our increasingly technological vehicles, were expected. Thus, while we are off March’s huge +9.8% Retail Sales ex-Autos, again we are operating from strength.

Ex-Autos & Gas, this figure reduces again, to +1.1% — the same as the Sales Control Group number, which gets plugged into other economic metrics and is thus an important tool for understanding the economy. It is also a Control number 3x higher than expected. Gas stations gained 2.5% on the month, as brick and mortar stores all along the Retail space saw increased business. Food & Drinking Establishments gained +2.3% — +40% year over year!

We’re back to wringing our hands about inflation running amok and the Fed asleep at the wheel. But this narrative, while being pushed with gusto in some areas, is not really supported by the numbers. Consider year-to-date Retail Sales: +2.6%, on average through the first half of 2021, is strong but not “out of control.” In fact, for months the Fed has been enticing growth to push beyond optimum 2% to fill in gaps where the economy has been parched over the past several years.

Fed Chair Jay Powell has spent plenty of time this week on Capitol Hill discussing how the economy is unfolding more or less on the Fed’s desired timeline. Further, after this supply shock is weathered — in a couple months or so — Powell & Co. expect to see a clearer outlook where inflation is not so transitory, and will make changes to monetary policy then, but not before. Many investors disagree with this tack. Hey, it’s a free country.

Meanwhile, market futures are up a half-hour ahead of Friday’s opening bell, with a slight bias toward growth/tech stocks: the Dow is +70 points at this hour, the S&P 500 is +10 and the Nasdaq is +60. This week has asked investors to take in a lot of information, and market activity has been a tad hesitant as a result. The Nasdaq looks to make up somewhat for three straight down trading days. Being a summer Friday, we may see limited trading volume.

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