Retail Sales Defy Expectations Amid High Interest Rates | Episode 155 | 07-16-24

In this episode, Megan discusses the unexpected consumer spending behavior despite the high credit card debt and soaring interest rates. June's retail sales data has painted a surprising picture, showing how consumers navigate these economic pressures. Contrary to the anticipated decline, retail sales remained flat, providing a beacon of stability amid financial challenges.

One of the standout revelations from June's data is the strength in specific retail sectors. Internet sales, building materials, health care, personal care, and clothing posted significant gains. These areas have shown remarkable robustness, reflecting consumers' adaptive spending habits. The uptick in internet sales is particularly noteworthy, as it underscores the ongoing shift towards e-commerce. Building materials also rose, possibly driven by a renewed interest in home improvement projects.

Despite these positive trends, not all sectors fared equally well. Motor vehicle sales experienced a decline, likely influenced by falling automobile prices and possibly a saturation in demand. Additionally, restaurant spending showed some softness, indicating that consumers might be cutting back on discretionary spending in favor of essential items. This mixed performance across sectors highlights the complexity of consumer behavior in the current economic climate.

Find out more in today's episode.

Well, a record high credit card debt and very high interest rates is not stopping the consumer. This morning it is Tuesday, july 16th, and we got the June reading on retail sales and what we saw was this report came in better than expected across all of the different segments that we look at. So let's just look at headline retail sales. The expectation was that this would decline 0.3% for the month, because we know that gasoline stations sales have been lower, but in fact that came in flat, and that's after being upwardly revised for the month of May. When you strip out some of these volatile items like autos and gas, this report came in up eight-tenths of a report, also with an upward revision to the prior month. And then, when we go really really digging into and strip out all of the volatile items, including building materials, this came in 0.9% on a month-over-month basis. The expectation was for it to only rise 0.2%. So when you look at that, that matches the best reading that we've seen on a monthly basis for retail sales since April of 2023. So let's dig into some of the things that consumers started to spend on. The biggest decline was in motor vehicles, so we've seen that automobile prices are down and also, sales have been down, but we did see some big upticks in internet sales. We saw also some significant upticks in building materials, health care, personal care as well as clothing. We saw a little bit of softness in the restaurant sales, so it still does prove to us that consumers may be pulling back a bit on some of the discretionary items, but on balance, this is a very solid report.

The equity markets are continuing the rally that we saw yesterday. The optimism around this perfect soft landing and the Fed being able to come in and cut interest rates as early as September continues to fuel this rally, and we're seeing the rally broaden out beyond the main technology names that have led this market higher this year. That's all that we have today. Please like the podcast. Share it with your friends and families and if you'd like to see any other podcasts that we have, please feel free to reach out to verdence dot com backslash podcasts website. Thank you.