No More Excitement? – The US Retail Sales Report
Market movement has been mostly determined by what we are expecting to occur in the future, which is improvements in our economy. Recent rallies have been driven by that belief, and it continued to be enforced after recent economic data releases. The CPI inflation report, for example, fell in line with economist expectations as a slowdown occurred, boosting hopes of a future halt in rate hikes. However, that was countered with some disappointing data, and one could argue that it has more meaning.
On Wednesday, the US released retail data for the month of December, and economic woes were present on the front cover. Retail spending fell by 1.1 percent in December when seasonally adjusted, the steepest drop in all of 2022. Holiday season was anything but a holiday for retailers, with inflation and interest rates causing a dent in demand. The National Retail Federation said that holiday season sales rose by 5.3 percent, a disappointing number considering the expectation was a 6 to 8 percent increase. As we discussed when covering the inflation report last week, the cost of services is increasing, which has caused consumers to be unable to realize the slowdown in inflation that occurred last month. One of the areas that is struggling the most is apparel, which has been extremely inefficient for big retailers. Apparel has continued to struggle as consumers continue to have low amounts of discretionary income, and this has caused a continued inventory backlog for large department stores. Retailers like Lululemon and Macy’s warned of a disappointing holiday season beforehand, but the data provided a viewpoint for the whole economy. Due to this, S&P Global adjusted their fourth-quarter GDP growth to a 2.3 percent increase, which concerned many investors. The economy seems to be in a confused state, but we’ll see what the Federal Reserve’s take is.
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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.