Data released today showed an unexpected decline in retail sales during February. The negative numbers were partially offset by positive revisions to January’s numbers. According to analysts at Wells Fargo, the mixed report on retail sales puts the 3-month annualized rate of decline in control group sales in a spot usually associated with recession. But they consider the current weakens to be temporary.
Key Quotes:
“Retail sales fell 0.2% in February, but that comes on the heels of a revision, which more than tripled the first estimate for sales growth in January.”
“The control group, which feeds into estimates for personal consumption expenditures in the GDP report, fell 0.2% in February. But evidence of the upward revision to January were evident here as well, lifting the increase in January control group sales to 1.7%””the biggest one-month pop in 17 years.“
“The retail sales numbers have been extraordinarily choppy in recent months and the government shutdown occurred right in the middle of what appears to be an inflection point for the consumer.”
“Our sense is that this weakness is temporary. By a number of metrics, the job market is as good as it has been since the turn of the century. The stock market, while certainly jittery, is just a few percentage points from all-time highs, which has lifted household wealth considerably over the past decade. These are not the conditions we would look for to identify a sustained retrenchment in consumer spending.”
“There are many potential culprits for the recent weakness: the government shutdown which spooked financial markets, the polar vortex which kept consumers indoors and the timing and size of tax refunds. All of these factors are already fading, and we are on the record as saying that tax refunds may be later, but won’t be meaningfully different from prior years.”
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