Having flip-flopped between expansion and contraction for the last four months – post-stimmy – analysts expected retail sales to drop in August for the second straight month as Delta fearmongering tamped down any recovery enthusiasm (though we note that BofA expected a rebound – and they have been spot on with their guesses all year).
And once again they were right as August retail sales jumped 0.7% MoM (completely smashing the expectation of 0.7% MoM drop), but we do temper our enthusiasm by the fact that July’s data was revised dramatically lower (from -1.1% MoM to -1.8% MoM)…
Source: Bloomberg
The rest of the retail sales data also smashed expectations
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Retail Sales Ex Autos +1.8% MoM vs 0.0% Exp
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Retail Sales Ex Auto and Gas +2.0% MoM vs 0.0% Exp
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Retail Sales Control Group +2.5% vs 0.0% Exp.
Despite the beat, Motor Vehicles, Electronics, and Sporting Goods all saw sales plunge MoM…
With stimmies having dried up, the question is whether the post-COVID-lockdown surge in retail sales will inevitably suffer a hangover return to trend?
Source: Bloomberg
Finally, we note that the retail inventory-to-sales ratio has completely decoupled from anything that has come before…
Source: Bloomberg
How does this resolve itself? Pent-up demand-driven surge in inventories – which sparks even more inflation – or reversion-to-the-norm retail sales as stimmies run dry?
