US retail sales rose in August, but investors see reasons for pessimism
The S&P 500 and Dow Jones fell on Thursday, despite positive data on retail sales growth in the US in August. Market analysts have pointed to signs of the Delta strain and uncertainty when the supply gap will end in large markets.
On Thursday, government data on US retail sales for August. This report is one of the critical indicators of the “health” of the economy and an essential signal for stock market investors.
Unexpectedly, August data showed an increase in total retail sales among Americans – up 0.7% from the previous month and 15.1% from August 2020.
Economists, on the other hand, had forecast a 0.7% decline in August compared with July.
Excluding auto sales rose 2% in August, beating expectations for a 0.1% decline. At the same time, the data for July were revised for the worse – to – 1.8%. The chart below shows monthly US retail sales statistics since the beginning of 2020.
In August, the rise in retail sales partly dispels investor concerns about US retail sales in China, which disappointed last month.
Inflation hasn’t hit as hard as economists expected
In addition, the data could potentially allay fears that higher inflation could slow consumer demand. According to the Leuthold Group, the CPI has recently surpassed 5% year-on-year, outpacing wage growth by nearly 4%.
Leuthold analysts write that consumer demand has typically fallen when prices rise faster than wages in past economic cycles. But, at least in August, consumer demand has been relatively robust, even as product shortages have pushed companies to increase spending, prompting some to raise prices.
Stock indices fell
Despite the positive data, the S&P 500 and Dow Jones closed on Thursday with a decline of 0.15% and 0.18%, respectively.
Market analysts indicated two signals in the latest data about the growing impact of the spread of the COVID-19 Delta strain in the United States.
First, the retail sales data for August showed the primary growth in the furniture and home furnishings categories, while the expenses in the catering establishments remained at the same level.
Second, the US Department of Labor’s weekly report on Thursday showed the first rise in jobless claims after three weeks of decline. Third, at the same time, the situation by the consequences of the devastating hurricane Ida, which struck the US state of Louisiana.
The US nonfarm payrolls report in August showed a sharp decline after four months of solid growth.
The supply deficit continues, pushing price increases.
On Thursday, the retail sales report showed that sales in the auto sector continued to fall – in August, falling nearly 4% from the previous month. The global shortage of semiconductors constrains car production, leading to higher prices for new and used cars. General Motors (GM) on Thursday announced an extension of the downtime of its plants.
The chip shortage to persist through the end of this year, with some analysts warning that it will remain a problem in 2022.
Tom Essay, the founder of Sevens Report Research, believes that investors see a growing problem in supply shortages. In contrast, investors need to see more convincing growth and positive economic data in the coming weeks to be more optimistic. Unfortunately, as is always the case with financial data, one month’s results do not necessarily represent a steady trend.
Investors are also trying to gauge when the Federal Reserve raises interest rates. But, again, robust economic data only strengthens the case for a rate hike sooner rather than later.
