May 16, 2023
Retail sales rose 0.4% in April after having declined 0.7% in March. In the past year retail sales have climbed by 1.6%.
Motor vehicle sales rose 0.4% in April after having fallen 1.4% in March. In the past year car sales have declined 0.5%.
Retail sales ex autos and gas, which eliminates the two most volatile components and is a better gauge of the trend pace of sales, rose 0.6% in April after having declined 0.5% in March The consumers’ pace of spending is slowing gradually. In the past year this series has risen 4.3%. The object for the Fed is to reduce the pace of economic activity so that the unemployment rate actually rises slightly from its current level of 3.4% at least to the 4.0% mark (which is widely regarded as the full employment threshold) but preferably somewhat higher to about 4.5%. Thus far it is not doing that.
Restaurant sales climed 0.6% in April after having risen 0.3% in March. In the past year restaurant sales have risen 9.4%. Consumers still seem perfectly willing to go out to a restaurant.
Sales at nonstore retailers rose 1.2% in April after having climbed 0.4% in March. In the past year nonstore sales have risen 8.0%. .
The problem is that inflation has been rising as quickly as sales and, as a result, real retail sales arer not growing in real term. Our income has been rising and we keep spending, but the amount of goods and services we are able to purchase with our fatter paycheck is somewhat less than it was a year ago. In April real sales rose 0.1% after having declined 0.7% in March. In the past year real retail sales have declined 3.2%.
Also, keep in mind that retail sales tells us something about consumer spending on goods — which has been essentially flat for more than a year. In the past year real spending on goods has risen 1.0% . But the place where consumers have been spending money has been on services like traveling which has boosted air travel and hotel spending, dining out, and the like. Real spending on services has risen 2.4%. The economy is slowing, but thus far the slowdown has been gradual and concentrated in goods.
GDP seems on track to increase 2.0% in the second quarter. We also anticipate GDP growth of 1.3% in 2023 as real interest rates remain slightly negative, firms keep creating a sizeable number of jobs each month, and the unemployment rate remains at a 50-year low. With no fear of losing their job, consumers are likely to just keep spending.
How much of the $2T is going to large corporations vs small business?
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.
I pray for a weak covid episode and a quick recovery!