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“Back To Normal” for US Retail Sales?

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Politics has taken center stage in the US, with even the latest polls pushing the markets.

We can expect the economic situation to play a strong role in people’s decisions on who to vote for. Therefore, economic data is getting the political treatment in many media outlets.

But that doesn’t help traders who need real data to understand how the market is reacting.

The pace of the US economic recovery is controversial, especially as Europe enters its version of a second wave.

However, the underlying situation of consumer confidence is best measured by where people are putting their money. The actual economic situation of the population is more accurately measured by whether or not they are, indeed, spending money.

The Trends

Retail sales naturally took a dive during the first phase of the pandemic.

Once lockdowns started lifting and government assistance became available, retail sales subsequently spiked higher to meet pent-up demand.

Through summer, retail sales remained high, even as case numbers increased.

As the US rolled over to the peak of the “second wave” (or extension of the first, depending on who you ask,) by the start of autumn, retail sales growth had fallen back to a more normal range.

As the situation in the US normalized through September, the retail sales component has as well.

What We Are Looking For

Expectations are for retail sales for September to have returned to (broadly speaking) pre-pandemic levels. That is, there isn’t any pent-up demand, or issues of supply shocks to provoque a significantly deviated number.

The consensus of expectations is that retail sales grew by 0.6% in September, compared to 0.7% in August.

Excluding autos, projections indicate that retail sales will have grown by 0.7% compared to 0.5% in the prior month.

Remember that during the summer, there was a lack of supply of new cars on the market, as dealers had held back on restocking over fears of lower sales from COVID.

That situation appears to be normalizing, as customers are no longer reporting long wait periods to buy or lease cars.

The Exception to Prove the Rule

For better insight into the situation of the economy, we might want to pay extra attention this time around to the Retail Sales Control Group.

Expecations are for this to come in at -0.1% compared to 0.2%. The Control Group represents total industry sales, unadjusted for seasonal and trend factors.

The US has experienced a similar phenomenon as other places around the world.

People are increasing their savings and cutting discretionary spending. This might explain the differential of why total industrial retail sales have not increased at the same rate as comparable retail sales.

People are focusing on buying “essentials”, supporting increased retail sales in volumes, while total value of retail sales shrinks. Basically, people are preferring cheaper products.

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