Tags: retail | sales | investors | shutdown

Govt Shutdown Distorted Retail Sales Data  

Govt Shutdown Distorted Retail Sales Data  

By    |   Monday, 01 April 2019 10:29 AM

The “advance” Monthly Retail Trade Report shows that U.S. retail and food services sales for February decreased 0.2 percent (±0.5 percent) from January, but was 2.2 percent (±0.7 percent) above February 2018.

Total sales for the December 2018 through February 2019 period were up 2.2 percent (±0.5 percent). The December 2018 to January 2019 percent change was revised from up 0.2 percent (±0.5 percent) to up 0.7 percent (±0.3 percent).

Retail trade sales were down 0.2 percent (±0.5 percent) from January 2019, but 2.1 percent (±0.5 percent) above last year. Non-store retailers were up 10.0 percent (±1.8 percent) from February 2018, while health and personal care stores were up 5.9 percent (±2.5 percent) from last year.

Investors could do well taking into account that the retail sales data collection and processing were delayed for the February release due to the lapse in federal funding from December 22, 2018 through January 25. We’ll have to wait for the March numbers to have a better overview.

On Friday, Dallas Fed President Robert Kaplan, who isn’t currently a voting member of the Federal Open Market Committee (FOMC), gave some interesting comments on where the Fed’s interest rates could or could not be headed.

“I didn’t have any rate increases for 2019. It doesn’t mean that I couldn’t change my mind. I wouldn’t rule out what action we are going to take.”

On the Fed’s actual monetary policy he added that Fed is still mildly “accommodative” with rates in the neighborhood of neutral.

Kaplan also said that “first-quarter data are going to be a little bit noisy,” and there are “lots of odd things going on,” some of which is related to the now-resolved partial government shutdown, and that argues against a pessimistic interpretation for now, the Wall Street Journal reported.

Besides that, today we have abundant global data flows.

Some positive signals have started to appear in shipping freight rates it appears, suggesting demand to move goods from point A to point B may be increasing.

Investors should look at this in the context of the start of a shift to structural trade patterns. We probably hit peak globalization.

It should also be borne in mind that U.S. importers may “delay” buying goods in anticipation of an end of President Donald Trump’s tariffs on imported goods partially made in China that are in fact taxes on U.S. consumers. That would then have a temporary dampening effect on trade.

China’s purchasing manager index business sentiment opinion polls (PMI), official and private, also got a boost in March.

The private Caixin China General Manufacturing PMI came in at 50.8 in March, up from 49.9 in February, indicating a notable improvement in the manufacturing industry. The sub-index for new orders climbed to its highest level in four months, and the gauge for new export orders returned to expansionary territory, showing that both domestic and external demand rebounded moderately.

Overall, with a more relaxed financing environment, government efforts to bail out the private sector and positive progress in Sino-U.S. trade talks, the situation across the manufacturing sector recovered in March while the employment situation improved greatly.

For investors this very positive and unexpected news out of China that means for financial markets “Risk On,” at least for the time being, which is of course somewhat negative for the dollar.

Japan’s Tankan survey of business sentiment perhaps best reflects the overall state of things.

Sentiment in business tends to be affected by the media news cycle and the effects of an ever more sensationalist media are not fully filtered. The reporting of trade tensions therefore has an impact on business sentiment and it weakens sentiment in Japanese manufacturing.

However, one of the main negative effects of the trade tensions has been to depress business spending. Consumers have tended to carry on ignoring the noise.

The Bank of Japan’s (BOJ) Tankan survey signals an intention to increase capital spending that was stronger than what markets had looked for, which is a positive.

Meanwhile, the Final IHS Markit / BME German manufacturing PMI disappointed as it came in at 44.1, its lowest level since July 2012 while new orders posted their steepest drop since April 2009.  Both total new orders and export sales are now falling at rates not seen since the global financial crisis, with more and more firms reporting lower demand linked to Brexit and trade uncertainty, troubles in the automotive industry and generally softer global demand.

No, things are not going well in Germany as well as in the whole Eurozone, which is euro negative.

Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.

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Investors could do well taking into account that the data collection and processing were delayed for the February release due to the lapse in federal funding from December 22, 2018 through January 25. We’ll have to wait for the March numbers to have a better overview.
retail, sales, investors, shutdown
Monday, 01 April 2019 10:29 AM
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