September 16, 2021
Retail sales rose 0.7% in August after having fallen 1.8% in July after having risen 0.9% in June The 0.7% increase in August was in sharp contrast to the 0.7% decline that had been expected. The increase would have been even larger except for a 3.6% drop in auto sales caused by an inability to get computer chips. Ex autos and gas, which eliminates the two most volatile components jumped 2.0% after having fallen 1.4 in July.
A better sense of what is going on can be seen from the level of sales which is far above the level of sales that existed prior to the recession. A large part of the rebound is attributable to the series of three tax refund checks that have been distributed since this time last year. Keep in mind that car sales are $20 billion below the level that existed in March because of the severe shortage of computer chips. As these parts shortages are eliminated the auto component and overall retail sales will get a significant boost. Sales will be augmented in the months ahead by sizeable gains in employment as the federal unemployment benefits expire.
The one category of sales that has consistently fallen short of its year-ago level is restaurants and bars. However, with big increases in the past five months restaurant sales are now 8.7% higher than their pre-recession level. As the re-opening process gathers momentum in the months ahead these sales should continue to climb.
As of today 209 million Americans have already received at least one shot of the vaccine. Another 41 million Americans have had the virus and should also have immunity. That is 250 million people out of our population of 330 million which is 76%. Herd immunity is deemed to be somewhere between 60-80%. While the number of new cases have been rising, Americans have not been particularly concerned despite the press rhetoric and continue to spend vigorously.
With consumers spending freely we expect GDP growth of 8.0% growth in Q2 and 10.5% growth in Q4. That gets us 7.8% GDP growth in 2021 and we anticipate growth of 5.1% in 2022..
Stephen Slifer
NumberNomics
Charleston, SC
Hi Steve,
How much of the $2T is going to large corporations vs small business?
Hi Brian,
There are tons of different pieces to that program. But it appears to me that the only “big business” that is getting money is the airline industry. Here are some of the highlights:
1. Every taxpayer receives $1,200 check. $500 extra per kid.
2. Unemployed workers get extgra $600/ week for up to 4 months. When couple with state benefits, some will be making more on unemployment than on their day job.
3. Hospitals get $100. Losing money because they are forced to postpone elective surgeries which is wher they make their money. I think they also get a bigger reimbursement from Social Security for treating COVID19 patients.
4. Airlines get $29 billion in grants, $29 billion in loans.
5. Small businesses get tax credit if they keep workers on the payroll.
6. State and local governments get $150 billion. They are losing sales tax and corporate profits + they have expenses involved with the corona virus like police, fire, EMT.
7. Defense Dept. gets $10.5 billion for deploying National Guard to distribute medical supplies, food, etc.
8 Employers get to defer the 6.25% payroll tax which is their portion of funding Social Security.
9. Payments in there for telemedicine, food stamps, farmers.
A little something for everybody.
Steve