The recently released US retail sales data for September has sent alarm bells ringing among economists and market analysts. UBS called the numbers “dated” and “somewhat unconvincing,” a sign of the tough economic headwinds. It tracks how rapidly changing consumer spending trends come into focus. It includes nominal numbers, which is important because they are affected by the impact inflation has had.
The current government shutdown has brought about a preventable data drought, forcing us to over-rely on years-old data. These circumstances have further escalated the emphasis on anecdotal data. A good example is the Federal Reserve’s Beige Book, which provides a glimpse into business conditions based on qualitative impressions rather than quantitative data.
It’s important to get the context of the September retail sales data in order to evaluate it correctly. While the data paints a vivid picture of optimism, it doesn’t tell the entire story. Inflationary pressures are dramatically changing consumer behavior. Other analysts argue that the short term, inflationary impacts must be taken into account when interpreting the data.
Paul Donovan of UBS noted, “US September retail sales data were old [news], but slightly softer.” This statement underscores the necessity for caution amid potential revisions that could reshape perceptions of consumer spending during this period. Despite rhetoric around a new normal of consumption patterns, the effect of these trends on retail sales is rapidly accelerating.
The possibility for upward revision to the September numbers only deepens that concern. Observers worry that blaming the accelerating inflation rate solely for the softer retail sales may not provide an accurate assessment of the economic situation. We need to be honest with ourselves that these numbers have been greatly affected by major changes in consumer preferences. Knowing these different elements makes all the difference.
“Ongoing shifts in consumption patterns have consequences,” highlighted an unnamed source, emphasizing that changes in how consumers spend their money can lead to variations in retail performance.