Will Investors Brush Aside the February Retail Sales?

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The US Commerce Department will be releasing the monthly retail sales figures. Forecasts for February 2020 show a 0.2% increase on the headline and the core for the month. This marks a modest slowdown from the 0.3% increase on both counts in the month before.

Amid the current market chaos, it is unlikely that the retail sales numbers will garner much attention, let alone move the markets. Due to the health crisis, the economic data covering retail sales could be put on the backburner.

Still, the data will reveal insights into how the US economy is faring as the world’s largest economy is now also affected due to the pandemic.

At the time, the US economy was somewhat insulated from the virus outbreak.

The consumer sentiment index, as measured by the University of Michigan, remained near the highs of 101.0. This was little changed from the preliminary estimates and was the second-highest on record so far.

Thus, there is a slight chance that the retail sales figures could match, if not beat the forecasts.

But the question is whether this report will have any impact on the markets. To get a better idea of the retail sales report for February 2020, let’s look at auto sales, an important segment to analyze.

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Feb 2020 Auto Sales Surprise with Strong Pick-Up

Despite the global crisis, automotive sales in the United States for February were stronger than many would expect. They didn’t suffer much of an impact from the spread of COVID-19, as the virus was still nascent in the United States at that point in time.

New vehicle sales rose 8.4% from January. Overall, the sales volume in February was at 16.8 million.

Retail sales of new vehicles rose to 9.9% compared to the same period a year ago.

The boost from the retail sales figures in the automotive sector could give a bump and perhaps offset any declines from other sectors. Despite this, investors will brush aside the data as being stale amid the current narrative.

For the month, other indicators suggest that US retail sales could be stable. These include the February jobs report which saw another +200k reading.

Wage growth during the month was also relatively stable, suggesting that retail sales numbers are inline, if not higher, than the forecasts.

This remains consistent with the view that the pandemic reached critical levels within the US administration only into late February/early March.

What is the Impact of the Retail Sales Report?

At best, the data will help to push up the GDP numbers for the first quarter. But this too seems like a futile attempt. Given the market conditions, economic data from March onward could start to show the real impact of the health crisis.

Various consumer sentiment indicators from other economic regions such as the eurozone show deteriorating conditions. This is largely due to the disruptions caused by the health crisis.

Thus, even a good reading on the retail sales sector for February will be overshadowed. Investors will more likely want to see what the future holds. For the moment, the first-quarter GDP numbers are tracking around an average of 1.5%.

A weaker than forecast reading on retail sales will only help to exacerbate the market panic at this point in time. Ironically, a beat on the estimates is unlikely to do much good for the markets either.

All in all, while the retail sales figures are an important indicator for investors, given the current scenario, we could expect investors to brush aside the data.

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