Retail Sales a Warning?
Retail sales flashing a warning? Sales have recently taken a serious pounding, which many claim is due primarily to the awful winter weather in much of the US. While the tough winter undoubtedly did have an impact, the chart below (which shows the month-over-month percentage change in retail sales and the quarter-over-quarter percentage change in US GDP) indicates to at least to yours truly that there is a bit more to the story.
Since November 2014, sales have dropped over 3%. The only time the drop has been larger was from June 2008 to December 2008 when sales fell by 13%. Retails sales have declined in 4 of the past 6 months and 8 of the past 12 months.
If we look at the broader picture of the consumer we see that:
- Consumer Confidence has fallen in 3 of the past 4 months and 7 of the past 12 months (trend is worsening)
- Personal Income has fallen in 6 of the past 12 months
- Personal Spending has fallen in 4 of the past 7 months and 5 of the past 12 (trend is worsening)
- Jobless claims have risen in 4 of the past 6 months and 7 of the past 12 (trend is worsening)
- Average hourly earnings have declined in 5 of the past 6 months and 8 of the past 12 (trend is worsening)
- Challenger job cuts have increased every month over the past 4 months (Not good!)
For the economy as a whole, Bespoke Investment Group’s summary of economic indicators is currently at its worst reading in a year and has only improved in one of the past 6 months!
It certainly does not look to us like this is an economy about to overheat, needing the Fed to tightening the monetary belt! While it is foolish to believe one can accurately predict the behavior of bureaucrats, it certainly doesn’t look like the Fed has a compelling reason to tighten rates in June. We believe it likely they will hold off raising rates until the data coming in looks stronger than it does today.
