Retail Sales Feb 2024: Consumers Will Stop Shopping …Someday
We look at a mixed Retail Sales picture on a day PPI disappointed UST bulls.
There are a lot of calls in the market that say the brakes will get slammed on the consumer’s compulsion to consume, and Retail Sales in the weeds were soft along some key lines relative to the late spring and that brief turning point in summer/early fall when Retail Sales rattled the UST curve ahead of the late year rally and reversal.
The current release is most definitely not a “slam” on the brakes even if spending is spottier and Jan 2024 saw a material downward revision to a bigger negative.
The Retail Sales headline number for Feb 2024 at +0.6% looked solid vs. Jan 2024, but ex-Autos was +0.3% and Core Retail was 0.0% after -0.3% in Jan 2024 and 0.0% in Dec 2023.
The “Core Retail” line was much weaker than the 3-month stretch of July 2023 to Sept 2023 as well as the springtime stretch from April to June 2023.
Retail sales was not the main headline today with PPI coming in hotter than expected, but Retail sales did not help the UST bulls much. Under the theory that more consumption is better than less consumption for the stock market and signals around consumer moods, the headline Retail number for Total Retail Sales was at least comfortably positive after two negative months.
We see 3 of the last 4 months of headline Retail Sales in the red prior to Feb 2024 (Oct to Jan), and that mix goes on the scoresheet (in pencil) in favor of the duration bulls even if not for the “ease sooner” crowd. The PPI details today get back to the question of Fed timing, and the scoresheet remains busy on the pros and cons. PPI was certainly a “con” in the “tighten soon” debate while Retail Sales was a toss-up.
As we look into the Retail Sales weeds in the next chart, the granular look at the key line items shows enough weakness to calm some UST nerves on a major consumer rebound but not enough to see it go into the “excuse to ease” column. The UST curve took its time reacting but voted against the overall mix of economic release numbers as the morning unfolded. As we go to print, the 5Y and 10Y are up around 10 bps in a slight steepening from the 2Y UST.
As noted below, Autos ex-parts came in at +1.8% with credit still available for the employed with job openings bountiful (see JOLTS Jan 2024: Holding at “High” Even if Well Down from the Peak 3-6-34). Inflation was mixed this week and now Retail Sales were mixed. Jobs drive the ability to spend and that is still supportive of growth.
Tomorrow, we get Industrial Production numbers for a fresh look at a critical sector in the broader economic picture. Generally, the manufacturing sector has been more supportive of UST bulls than consumer related releases. The last push to 2.0% PCE inflation needs all the help it can get.
The themes around jobs get a lot of Three Card Monte politics on the basic facts, but the state level numbers are very strong in employment (see Employment: Real Numbers vs. Fictitious Dystopian Hellscapes 3-9-24) as a counterpoint to the political noise. That bullish state level backdrop goes into a metamorphosis in national politics as the worst economy ever (ever ever!). The partisans missed the memo that the state economies roll up into a national economy. Some of the media meatheads need to start pressing the political talking point zombies on the inconsistencies of “great state economy, terrible national economy” messaging.
You have a hard time buying a house or a car (on credit) without a job, and employment also helps in spending money to fix up properties. It is no coincidence that Autos ex-Parts and Building Supplies rose as spring is on the doorstep and decisions need to be made and prepped on residential spending.
The line items at the headline level (+0.6%) and those above the “Core Retail” lines came in solid enough with Restaurants/Bars and the Gas Stations rising. The latter is a function of the nominal price of gasoline moving higher while Building Supplies could be gearing up for spring. At the bottom of the chart, we see positive lines for “Autos ex-parts” with its high index weighting (17.5% weighting). We also see a consecutive month of positive numbers in Electronics & Appliances.
Inflation takes less blame on the price line for the rise in Dining and Drinking (Restaurants/Bars) with Food inflation at least well down into the 1% handle for Food at Home (+1.0%) while Food Away from Home in the CPI is still heady YoY at +4.5%. “Food Away from Home” did get a relief month for MoM in Feb 2024 in the CPI index at only +0.1% for full service and limited-service meals after a rough stretch of months. “Food away from home” has an X-factor in rising labor costs that have to be recaptured in nominal prices at the table/counter.
See also:
CPI Feb 2024: Extra Innings 3-12-24
Footnotes & Flashbacks: State of Yields 3-10-24
Employment: Real Numbers vs. Fictitious Dystopian Hellscapes 3-9-24
Payroll Feb 2024: Record, Revisions, Reality 3-8-24
JOLTS Jan 2024: Holding at “High” Even if Well Down from the Peak 3-6-34
Inflation Gut Check Jan 2024: PCE Prices, Income, and Outlays Help the Story 2-29-24
4Q23 GDP: Second Estimate, Moving Parts 2-28-24
Industrial Production: Capacity Utilization Limps Along 2-15-24