The US Retails Sales and Market expectations

Expectations for a better economic return

Market analyst – IFC Markets

Besides all economic data in the Calendar, today’s eyes were on US Retails Sales. Retail sales usually in the economy is very important, because when country citizens agree to spend money and buy things, it means first of all that they are expecting another income, so the overall market sentiment is positive and growth expectations are increasing. At the same time, more sales mean better GDP for Q3. So we can increase our expectations for economic growth. 

According to the US Commerce Department, Retails Sales in August, rose 0.7%, while July’s final number also declined by 1.8%, instead of 1.1% of initial reports. This unexpected increase, comparing -0.8% decline, mostly boosted by students and school shopping, and child tax credit payments from the government.  

More detailed data telling us that despite the slow movement, still retails sales shifting to service sectors, from mostly goods in previous months. Excluding automobiles, gasoline, building materials, and food services, retail sales increased 2.5% in August, after a 1.9% decline in July. It means that in published numbers, service sectors playing more role, compared with earlier months. 

Today’s data can be a bit another way around with Wednesday JP Morgan’s economic Outlook, where they decreased the growth expectations from 7.0% to 5.0% for 2021. Also earlier this month we had some change in Goldman Sachs estimates that eased to a 3.5% rate from a 5.25% pace. In the “Beige Book” report last week, the economy grew estimated at a 6.6% rate in the second quarter.

According to the separate data, we know that Americans added at least $2 trillion in excess savings accumulated during the pandemic. And if recovery and reopenings go well, this cash can move to the market and increase economic growth contrary to expectations, especially if the government can ensure the effectiveness of their economic plans.

And finally, I have to mention that, since market participants already priced on tapering, now better than expected economic data, will be supportive and positive for stock markets. 

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