Jason Celente

Senior Portfolio Manager at Insight Investment
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Senior Portfolio Manager at Insight Investment

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  • Retail sales in 2020 demonstrates the willingness of the US consumer to spend in almost any environment. Predictably, consumption shifted from in-person retail and food services experiences to online and home-related expenditures. Gasoline station sales have been down while grocery and liquor store sales have been up. These trends reversed to some degree during the summer months as mobility restrictions were lifted.

    Retail sales thus remains an aggregate demand indicator as shifting consumption patterns perhaps merely identifies winners and losers in the pandemic economy. Importantly, fiscal stimulus has supported this aggregate demand during a period of significant job loss. So while the economy is learning to operate within a temporary construct, the question coming into today's retail sales economic release is, "Can recent gains in employment contribute enough to aggregate demand in order to offset the expiring unemployment benefits from the government?" The answer so far appears to be “no it can't” based on today's disappointing 0.3% month over month growth in retail sales, weighed down by declines in clothing.

    Consumption sectors less sensitive to the pandemic shift that have performed worse than their historical averages. These sectors include general merchandise and warehouse stores that have seen sales consistently growing in the 2% range historically and despite changes in consumption behavior. Today, these noncyclical sectors performed worse than expected and are perhaps indicating that another round of fiscal stimulus is likely needed to ensure sustainable economic activity through the Covid-winter. Non-store retailers were a standout at +3.1% month over month, though this was likely flattered by the postponement of Amazon Prime Day from July into October. Nonetheless, it is a reminder that COVID has accelerated several secular shifts, like the growth of e-commerce, to the point where individual corporate decisions can impact macroeconomic data.

  • It takes more than 10% growth from the new lower number in order to recoup your losses or your $90 would have to grow by 11.1% in order to recoup the $10 lost from your $100 investment.

  • The BEA equivalent of a full recovery in this example would be a 52% growth reading versus the current 30% estimates for the third quarter. So the recovery is off to a very good start, but we have a long way to go.