February Retail Sales Rose by 0.3%

The stock market is up strongly again today. The Nasdaq is up more than 2%. Finance and Tech are leading the way while defensive areas like Utilities and Staples are mostly unchanged.

There’s talk of a ceasefire but I’m skeptical. Today is another good example of a bounce off the bottom, or near bottom, but I’m suspicious of how long it will last.

At 2 pm, the Fed will release its policy statement. The Fed is widely expected to increase interest rates by 0.25%. After the meeting, Chairman Powell will hold a press conference.

We also got the retail sales report this morning. For February, retail sales rose by 0.3%. That was 1% below expectations. If we exclude autos, then sales were up just 0.2%. Expectations were for a gain of 0.9%.

The spending numbers were well below the rise in prices, which increased 0.8% in February, according to Labor Department data released last week. Retail spending numbers are not adjusted for inflation.

The biggest dent in February’s numbers came in online shopping, with nonstore sales down 3.7%.

One bright spot in the data released Wednesday is that January spending was revised up to an increase of 4.9%, a blistering pace that was even stronger than the initial estimate of 3.8%.

The two-month numbers “suggest that real consumption growth remains reasonably solid” though some headwinds are beginning to show, particularly from expected interest rate increases coming from the Federal Reserve, said Andrew Hunter, senior U.S. economist at Capital Economics.

“With real disposable incomes having already been falling since mid-2021, as earlier fiscal support was withdrawn, and the more general surge in prices took its toll, real consumption growth still looks likely to slow over the coming months, particularly when the personal savings rate is already below its pre-pandemic level,” Hunter wrote. “It also may not be long before Fed tightening starts to hit spending on big-ticket durables.”

Consumers, however, remain flush with cash, finishing 2021 with $1.4 trillion in savings though the personal savings rate, most recently at 6.4%, has been coming down steadily during the Covid pandemic era.

Demand has been extraordinary for goods over services, and supply has struggled to keep up. That has fueled inflation running at a 7.9% rate on a 12-month basis, the fastest pace in more than 40 years.

Posted by on March 16th, 2022 at 12:17 pm


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