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Retail Sales Crush Estimates, Lifting Dollar

by Hector Demarco | September 16, 2021

Advance retail sales rose 0.7 percent month-over-month in August, smashing expectations for a -0.7 percent contraction, and underlining the resilience of the US consumer.

In strengthening the hawks going into next week’s Federal Reserve meeting, the release triggered a jump in the trade-weighted dollar, but Treasury yields barely budged – suggesting that odds on a tapering decision were only modestly improved. 

Growth was evident in most tangible goods categories: Furniture stores recorded a 3.7 percent month-over-month gain, while receipts for building materials rose 0.9 percent and clothing eked out a 0.1 percent advance.

Items containing semiconductors weakened: With shortages and rising prices playing a role, sales of electronics and appliances dropped -3.1 percent, while the auto and auto parts segment lost -3.6 percent.

Both online and bricks-and-mortar stores gained: E-commerce retail sales climbed 5.3 percent, while general merchandise operations posted a 3.6 percent gain.

Spending at restaurants and bars flatlined: Food and drinking establishments recorded no improvement as the rapidly-spreading Delta variant convinced millions of citizens to entertain at home in August.

Low expectations set the stage for outperformance: After consumer sentiment surveys plunged in late summer, market participants downgraded demand forecasts – setting the stage for today’s positive surprise.

And sales could rise further: Coronavirus infections appear to be cresting in many states, and holiday spending will begin to ramp up in the coming months – some consulting companies are already forecasting a supercharged US holiday spending spree that could see sales surpass last year’s spectacular 5.8-percent expansion.

A separate report from the Department of Labor showed that the number of Americans filing new claims for unemployment benefits rose 20,000 to 332,000 last week, slightly above the consensus market forecast at 323,000. The 4-week moving average – used to smooth out weekly volatility and discern longer-term trends – fell to 335,750 from the previous week’s revised average of 340,000.

2.6 million people continued to collect jobless benefits under regular state programs in the week ending September 4, and in the week prior to that, 12.1 million were receiving payouts under all federal programs.

Jobless claims are trending down:  While the print may suggest that more workers lost their jobs last week than in the previous one – signalling economic weakness, the reality is that last week’s report was just a bit too good to be true – so much so that some analysts have partially attributed the record-low claims to a delay in applications caused by Hurricane Ida. The focus should be on the 4-week moving average, which continues to edge lower, suggesting ongoing improvement in the labour market.

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