October 16, 2020

.Retail sales jumped 1.9% in September after having climbed by 0.6% in August after having risen 1.1% in July.   Once again sales blew away the consensus forecast which called for an increase of just 0.5%.  There seems to be an ongoing narrative that the economy is slowing down, but yet every economic indicator released in the past five months has come in stronger than anticipated and that pattern has not changed yet.  What is truly amazing is that the level of sales has not only rebounded sharply, it is higher than it was going into the recession.  In fact, the level of sales is at a record high level as consumers catch up on some of those purchases that were deferred during the recession.  Over the past year retail sales have risen 5.2%.

Sometimes sales can be distorted by changes in autos and gasoline both of which can be quite volatile.  In this particular instance car sales rose 3.6% while gasoline sales rose 1.5%.   This means that retail sales ex autos and gas, sometimes known as “core retail sales” rose 1.5% in September after climbing 0.5% in August and 1.3% in July.

While retail sales was strong across the board in September, the one category that is still below year ago levels is food services and drinking places.  This category rose 2.1% in September, but remains 14.4% below its year ago level.  In contrast, total retail sales is 5.2% higher than it was in September of last year.

At the end of last year non-store retailers were 12.8% of the total retail sales.  They surged to 19.2% in April when most other stores were shut by the virus, but have backed down to 15.3% by September.

Q2 GDP decline 31.4%.  However, workers are gradually returning to work and GDP begin to climb again in May. Checks for the $3.0 trillion stimulus plan have dramatically boosted disposable consumer income.  At the same time the Fed is doing its part to make sure that the credit markets are able to access whatever funds they may require to get the economy back on track.  For this reason, we expect GDP to rebound by 28% in the third quarter and climb an additional 7.0% in Q4.

Stephen Slifer


Charleston, SC