Retails Sales Shifting to Slower Growth
Retail sales rose 0.6% month over month in August following July’s downwardly revised 0.9% advance, but sales fell short of Bloomberg’s consensus expectation for a 1% increase. The retail sales control group, which excludes building materials, autos, and gas, fell 0.1% month over month and also missed estimates (source: US Census Bureau).
The speed of retail sales’ recovery to pre-pandemic levels—just five months—has been remarkable, although the July 31 expiration of supplemental jobless benefits provided a headwind during the important back-to-school shopping season. During the 2008–09 financial crisis, retail sales did not return to their prior peak for more than three years!
As shown in the LPL Chart of the Day, sales in August 2020 were 2.6% higher than in August 2019, impressive given the impact of the pandemic and lockdown recession. Some restrictions have eased but many remain in place, making this rebound particularly impressive. August sales were 1.9% above the levels back in February, when the numbers were inflated by an 8.5% year-over-year increase in grocery store sales on some early shelf-stocking.
“Retail sales’ ability to remain above pre-pandemic levels is remarkable considering the shrinking boost from supplemental jobless benefits while social distancing and business restrictions have continued,” said LPL Financial Equity Strategist Jeffrey Buchbinder. “We expect steady gains to continue as more restrictions are eased and consumer confidence is restored, though still-high unemployment and dwindling stimulus make the road ahead a bit tougher.”
Looking at the various segments, sales gains were supported by the continued recovery in restaurants, up 4.7% (but still down 17% year over year), and housing-related spending. Weak spots included food sales, sporting goods (off elevated levels), and department stores. E-commerce sales continued to chug along, growing 20% year over year but were unchanged from July’s levels.
The consumer recovery from the pandemic has been impressive despite the shortfall in August retail sales. Fading stimulus and still-high unemployment may slow the pace of consumer spending growth this fall, but the progress to date is encouraging.
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