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
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