Shoppers Retreat – Macy’s and Best Buy’s Sales
Following a strong holiday season, there’s new evidence from company earnings pointing to new falling consumer demand. Last month, retail sales data for January depicted a robust consumer, increasing 3% month-over-month. This was over 60% more than what was estimated, despite rising prices in consumer goods and services. Now, as earnings season continues, we can take a deeper look into consumer behaviors in more recent months. Retailers Best Buy and Macy’s both reported earnings, indicating another year of declines as consumers finally feel pressure from high prices and interest rates. Purchases of non-essential goods such as electronics and apparel are continuing to fall, however, purchases of necessities such as food and energy continue to remain high.
Nevertheless, the claims from these large retailers have yet to affect the economic data, thus, may not be convincing enough to change the Federal Reserve’s plan to a potential large rate hike later this month. At a recent panel, Fed governor Christopher Waller claimed “hard evidence in the form of economic data” would be the sole driver behind their views on inflation. He continued to reiterate that if these hotter-than-anticipated reports continue throughout March, there may be sufficient need to raise the target federal funds rate over its maximum of 5.5%. Before the March 22 decision, investors should look at the data on the unemployment rate, PPI, and retail sales to judge the strength of the economy and the direction the Fed may take this year.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.