A Modest Start for Retailers – February 18, 2020

Retailers began the new year in a modest fashion, as early numbers weren’t too hot nor too cold.

Retail sales rose 0.3% in January. Ex-autos, sales were also up 0.3%. If we throw out autos and gas station sales (which helps filter for changes in gas prices), so-called ‘core sales’ rose a respectable 0.4%.

Note that monthly data can vary. We’ve seen that through much of the economic expansion – two steps forward, one step back. But the overall trend has been favorable.

Why are retail sales important? Consumer spending accounts for almost 70% of the U.S. economy per U.S. BEA data. Last year, manufacturing softened, but the consumer came through, and the economy continued to expand.

As we look ahead, the outlook is generally positive. In his testimony before two congressional committees last week, Fed Chief Jerome Powell noted, “Consumer spending has moderated, but fundamentals supporting spending “remain solid.”

Why? Consumer confidence is elevated, wages are rising modestly, and job growth has been solid.

If there’s one piece of data that might cause some concern, job openings have fallen sharply in recent months (U.S. BLS). It may be a sign that employers are seeing a slowdown in business.

Still, the level of job openings is high. Plus, we’ve seen no letup in job creation. And first-time claims for unemployment insurance are very low (U.S. Dept of Labor data), signaling companies don’t want to lose valued employees.

The coronavirus remains a question mark over global activity, at least temporarily, but the economy is off to a decent start this year.

Created 2020-02-18 15:16:50