Economists missed the mark on retail sales this month by a mile.
The Bloomberg Econoday consensus estimate was +0.4% in a range of +0.2% to +0.7%.
The result was 0.0%.
Highlights
Consumers spent their money on vehicles in July but not on much else as retail sales came in unchanged. When excluding autos, retail sales slipped 0.3 percent for the first decline in this reading since March. When excluding both autos and gasoline, the latter falling on lower prices, retail sales improve slightly but are still down 0.1 percent for the first decline since January. This core reading is telling and will likely define total consumer spending (which includes services) for the month of July.
The big plus that saves the report is the 1.1 percent monthly surge in motor vehicle sales, one that follows a 0.5 percent gain in June. Spending elsewhere may be weak, but spending on vehicles is a signal of consumer confidence and strength. Elsewhere, positives are hard to find.
Supermarket sales fell in the month as did building materials. Sporting goods were especially weak as were restaurant sales, the latter a discretionary category that speaks to the month’s lack of non-vehicle punch. On the plus side once again are sales at nonstore retailers which, driven by ecommerce, jumped a sizable 1.3 percent for a second straight month and follows even larger gains in prior months. Sales at gasoline stations, reflecting lower prices, swung 2.7 percent lower following a 2.2 percent gain in the prior month.
The consumer is the driver of the economy and July’s weakness for retail sales makes for a slow start to the third quarter and will ease talk for now of a September FOMC rate hike. Upward revisions are footnotes in the report with June now at plus 0.8 percent, up 2 tenths from the initial reading which will pull GDP revision estimates for the second quarter higher.
Recent History
Unit vehicle sales proved very strong in July and are the backbone for an expected 0.4 percent rise in retail sales. When excluding autos, retail sales are expected to post a less impressive 0.2 percent rise. But gasoline sales, pulled down by a drop in prices, will prove an outsized negative in report. When excluding both autos & gas, retail sales are expected to rise a solid 0.3 percent. This latter reading proved very strong during the spring.
Solidly Flat
Even with the upward revisions in June, economists missed the mark. The expected “solid 0.3 percent” rise excluding both autos & gas came in at negative 0.1%. Factoring in the +0.1 revision in June sales were “solidly flat”.
Don’t worry, it’s just another temporary soft patch.
Mike “Mish” Shedlock
It should be abundantly clear by now that none of this matters anymore.
It should be abundantly clear that economists predict as well as astrologers who never bothered to study astrology, maybe worse. The real skill that keeps them employed is reading the blowing wind.
Mish did you see this chart about which jobs likely to be automated in next 20 years.
http://finance.yahoo.com/news/half-us-jobs-could-taken-121100344.html
http://www.oxfordmartin.ox.ac.uk/downloads/academic/The_Future_of_Employment.pdf
Seems like they agree with you especially in terms of driving, para legals etc.
Tim
Three words that explain why this post contained no useful info:
“Bloomberg” — paparazzi that write whatever Mike Bloomberg tells them to think, unless it effects sales of the Bloomberg terminal
“Econoday” — a group of PhD economists, people with little or no connection to life off campus
“Forecast” — better known as an extremely biased guess, or an outright lie
Yep and yep to the first two comments…
Mish – On a related note to retail, any thoughts on the idea of “peak stuff”? Essentially, it’s the idea that the west has all of the physical “stuff” they need and that we’ve acclimated to having it, and thus, don’t no longer clamor for more. In other words, scarcity (in terms of physical goods in the West) is dying.
I can only attest anecdotally (and I suppose somewhat empirically based on the data you’ve posted), but I know that in cleaning out my house that I just sold (in IL, ha!), my wife and I agreed that we no longer wanted to buy as much useless junk. My in laws (who have heaps of it and have always loved buying it) are beginning to talk the same way. It seems as though the zeitgeist in regards to accumulating physical goods is changing.
I suppose “””economists””” will bemoan how terrible this is for the economy, but if I accurately remember econ 101, less spending on consumer goods equals greater resources available for capital goods and thus more production in the long run.
Here’s a link to an article about peak stuff as well: https://www.theguardian.com/commentisfree/2016/jan/31/consumerism-reached-peak-stuff-search-for-happiness
Thanks for the as always engaging analysis.
If I may, I agree completely. There is a trend toward “experiences” rather than “stuff.” The temptation is to affix the modifier “millenial” to this trend, but I believe “stuff fatigue” occurs across all cohorts. As for me, give me my self-driving vehicle and I will be done buying stuff forever.
Firmly agree that the whole gotta have stuff era is ending. I think that era was driven by the depridations of the Great Depression and WWII. People had been without for so long that they began accumulating as fast as they could. But now, its easy, especially as we get older, to realize that we’d rather have the cash because we have way too much stuff. A bunch of my neighbors park there cars outside because their garage’s are stuffed to the gills with useless crap that they won’t put into their house.
I don’t think that declining spending on consumer goods is going to lead to an increase in the production of capital goods though. Folks use capital goods to produce consumer goods. If no one wants the consumer goods, it wouldn’t make business sense to produce stuff no one wants or needs.
And I firmly believe that this time it really is different.
I think it’s simpler than that. Baby boomers are now in their late 50’s and early 60’s, and they still have the bulk of the buying power. People in that age group normally have all the “stuff” they need. The follow on baby boom peaked in 1991. Those people are now 25. They need “stuff’, but they don’t have the buying power to buy it all yet. Furthermore, they are getting married later, so they don’t have as much need for “stuff” as they otherwise might. Over the next few years expect the older baby boom to increasingly buy less “stuff” and the younger one to buy more “stuff”. The drop from the older generation should be faster and sharper than the rise of the younger one, most likely.
Gumnut needs to get with it and redistribute moar money. Free money will fix everything. Let’s get that minimum wage up to $50 bucks an hour, and double Federal, State and Local Parasitocrat salaries.
Need 2 no doc, zero interest for ten years, self driving Teslas in every garage. We won’t even need to get off the sofa,,,just send the car down to Walmart for some ‘lectronic stuff, then swing by Mickey D’s and pick up dinner on the way home, NO stops at the Indian casino, do hear me, car?
Debt-Doesn’t-Matter,,,remember?
But the stuck record keeps on skipping on all these stopped clocks,,,that aren’t even right twice a day anymore.
Face it. The Fed is the only game in town. If it lets this all go, not even gold will save us. Likely, lead will be the only hot commodity.
So, it might be a good time to start stackin’ some inflation hedges about now, Stawks, houses and other income producing “Wealth Effect” devices. Likely a better strategy than fighting the creator of the currency. Also, keep in mind, FDR is riding into town in a pantsuit, so might want to keep in mind that she wants your gold,,,,at a low price,,,so,,,
Well, at least the United States elected it’s first black President.
….and my guess is, it’s last.
RIGGED
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