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Retail Sales Have Continued Declining After Stimulus Ended

Down 20%
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EDITOR NOTE: The Census Department Advance Retail Sales Report shows that retail sales decreased 1.1% in July. This is a much bigger drop than expected and illustrates an important point very clearly. The lesson is, “people will spend free money,” but when the free money train runs out, the retail windfall stops as well. The federal government’s stimulus packages had the short-term intended effect and drove spikes in sales, but not that those are over American’s are being much more financially conservative. With other government programs, like enhanced unemployment set to end soon, these numbers will likely only get worse as the Fed and U.S. government don’t seem to have any long-term plans that will work like stimulus checks did in the short run. That’s a scary thought.

Advance Retail Sales - Detail 2021-07

The Census Department Advance Retail Sales Report shows sales decreased 1.1% in July. 

Such numbers shed little light on what's actually happening. The above chart and the next one shows what is happening.

Advance Retail Sales Major Categories 

Advance Retail Sales Major Categories 2021-07

 

Food and drinking sales are above pre-pandemic levels. Heck, even department store sales are up (albeit in a severe long-term decline).

Motor vehicles sales are well above pre-pandemic levels and likely would be even higher if there was not a shortage of microchips and other key parts.

People Will Spend Free Money

  • Sales collapsed at the onset on the pandemic
  • Sales surged in April and May of 2020 on the first round of stimulus under Trump
  • Sales flatlined until the second round of stimulus at the end of 2020 under Biden.
  • Sales surged on the second and third rounds of stimulus and have slightly fallen since.

In addition to free money checks that even went to the employed, many of those on unemployment made more being unemployed than they did working.

This led to a demand for labor coupled with escalating wages and escalating prices. The pandemic fueled more work-at-home arrangements including a demand for homes as well as a shortage of lumber. 

On top of the free money from Congress, the Fed goosed the stock markets with cheap money and record asset purchases including mortgage-backed securities fueling the already overheated housing market. 

Original post from Mish Talk 

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All articles are provided as a third party analysis and do not necessarily reflect the explicit views of GSI Exchange and should not be construed as financial advice.

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