Tags: Retail | Sales | heat | increase

Americans Got Out of the Heat By Spending at the Mall in July

Tuesday, 14 Aug 2012 10:56 AM

INDICATOR: July Retail Sales

KEY DATA: Sales: Up 0.8 percent; Excluding Vehicles: Up 0.8 percent

IN A NUTSHELL: “It looks like households hit the malls hard not just to get out of the heat, but also to spend.”

WHAT IT MEANS: When we got some reports that consumer confidence improved in July, I chalked it up to heat stroke. Well, it looks like I was wrong.

People beat the heat by having the malls pay for the air conditioning, and while they were there, they happened to pop into the stores and buy lots of goods. Consumer purchases soared in July and it was not just price-driven rising gasoline prices or a rebound in vehicle purchases. Every single component of the retail sales report rose, which was a real surprise.

Indeed, the only group that didn’t post at least a strong 0.5 percent gain was food and beverage stores, which were still up decently. The strong increase in restaurant sales meant households didn’t go on diets, they just changed where they got their nutrition.

In addition, the heat probably helped power the robust rise in online purchases, as people found it easier to shop at home rather than go outside.

MARKETS AND FED POLICY IMPLICATIONS: Let’s hear it for global warming, whether you believe it or not. When people cannot stand the heat, they get out of the kitchen and find other means to cool down. Okay, maybe not all the rise was due to the record-setting hot weather, but it probably helped.

More importantly, the July sales numbers point to a consumer sector where people are still quite willing to part with their hard-earned dollars. That correlates well with the improvement in confidence.

All that said, we have to look at the numbers carefully. For some unknown reason, for just about all types of stores, retail sales in June were down. Did households really stop buying one month and then decide they missed emptying their wallets the next?

I doubt that.

So, maybe there were some statistical issues involved. I don’t know, but I hardly expect a robust rise in retail sales in August as well. Still, we are starting the quarter off in good shape, and that bodes well for third-quarter growth.

This report should make investors happy. Nothing would do more for the economy and earnings than rising consumer demand. But until some of the growing piggy banks in the corporate sector are distributed to workers, there will be limited potential for spending. It is hard to keep up the spending pace when your income is flat and prices are rising.

Soaring gasoline costs, and soon to follow jumping food costs, mean the prospects are not good that households can carry the burden without help from businesses.

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Tuesday, 14 Aug 2012 10:56 AM
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