In my view July’s Retail Sales could reinforce two diametrically opposite narratives.

July’s overall retail sales disappointed, rising only by 1.2% vs. the consensus estimate of 2.1%, thus suggesting the rebound is stalling.   June’s data however was revised considerably higher to an 8.4% increase vs. the previously reported 7.5% gain.

Even so, the total value of retail sales was above pre-pandemic levels and July purchases were up from 2.7% from a year earlier according to government statistics.  Based upon headlines most would state retail sales are down considerably from last year’s level.  I must write the average annual increase in retail sales is 4.2% according to the Commerce Department.

The slowdown, as compared to June, is the result of decline in sales of motor vehicles and weaker gains at restaurants and clothing stores the Commerce Department said.

On the other hand, Retail Sales ex autos were up 1.5% vs. the consensus estimate of 1.0% and June’s data was also revised higher to a gain of 8.3% vs. the 7.3% initially reported.

The Federal Reserve closely followed “Control Group” which excludes food, car dealers and gasoline stations rose by 1.4% vs.  an estimate of 0.8%.  June’s data was also revised moderately higher.

I am interpreting the data as the consumer is demonstrating considerable durability in the face of the increased shutdowns.  An issue that can be at hand what will be the impact of the July 31 expiration of the additional $600 weekly unemployment benefit?    Will increased employment offset this expiration?  Most economist would suggest yes, an assumption that high frequency indicators are suggesting.

Also released Friday was the University of Michigan Consumer Confidence Survey.  The marginal increase adds to the message from the high frequency indicators that the negative impact from the expiry of the additional $600 weekly unemployment benefit has so far been offset by a positive impact from the downtrend in new virus cases and increase in jobs.

Consensus had expected a moderate decline in confidence because of the increase in Covid cases and the end of the $600 supplemental unemployment benefit.

Markets were mixed on the data.

This week’s economic calendar is comprised of various housing statistics, several manufacturing indices, the Minutes from the recent Fed meeting and weekly jobless claims.

Last night the foreign markets were up.   London was up 0.60%, Paris up 0.09% and Frankfurt up 0.23%.  China was up 2.34%,  Japan down 0.83% and Hang Sang up 0.65%.

The Dow should open nominally higher following China’s decision to further flood its financial system with more cash.  The 10-year is up 6/32 to yield 0.69%.


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