Soft U.S. retail sales point to moderating growth trend following reopening spurt

Soft U.S. retail sales point to moderating growth trend following reopening spurt

*Retail sales fell 1.1% in July, more than offsetting an upwardly revised 0.7% rise in June, as sales excluding autos dipped 0.4% and sales of motor vehicles and parts fell sharply for the third consecutive month, reflecting supply constraints (Charts 1 and 2).

*The flattening of retail sales, which now comprise 39% of total personal consumption expenditures, reflects a combination of factors: a natural moderation following its earlier spurt as the economy reopened, more spending on services, the negative impact of health concerns related to the Delta variant, and accelerating prices of durable and nondurable goods.

*While a slowdown following the reopening spurt in retail sales was inevitable, a big question is the extent to which the Delta variant and higher inflation will weigh on sales, and for how long. Although the factors normally driving consumer spending remain very positive—rising employment, wages, and disposable income; low interest rates; and record high household net worth—the negative factors likely will result in slower-than-forecasted growth in overall consumption in the third quarter. In fact, the sales control group—retail sales excluding autos, building materials, and gasoline stations—fell 1.0% in July, lowering it 0.5% below the Q2 average (Chart 3). While consumption of services remains in a strong upward growth trajectory, the pace of total consumption is softening.

*The auto industry continues to suffer from lack from insufficient supply: sales of motor vehicles and parts fell 3.9% in July, its third consecutive sharp decline as auto inventories have fallen substantially (Chart 4).

*Inventories are also low in other sectors, and the overall retail inventory/sales ratio has fallen to its lowest level in decades (Chart 5).

Chart 1: Monthly retail sales

Chart 2: Monthly retail sales ex. Motor vehicle and parts

Chart 3: Control group retail sales (ex. Auto, gas stations, building materials)

Chart 4: Retail Inventory of motor vehicles and parts

Chart 5: Inventory to sales ratio

Mickey Levy, mickey.levy@berenberg-us.com

© 2021 Berenberg Capital Markets, LLC, Member FINRA and SPIC

Remarks regarding foreign investors. The preparation of this document is subject to regulation by US law. The distribution of this document in other jurisdictions may be restricted by law, and persons, into whose possession this document comes, should inform themselves about, and observe, any such restrictions. United Kingdom This document is meant exclusively for institutional investors and market professionals, but not for private customers. It is not for distribution to or the use of private investors or private customers. Copyright BCM is a wholly owned subsidiary of Joh. Berenberg, Gossler & Co. KG (“Berenberg Bank”). BCM reserves all the rights in this document. No part of the document or its content may be rewritten, copied, photocopied or duplicated in any form by any means or redistributed without the BCM’s prior written consent. Berenberg Bank may distribute this commentary on a third party basis to its customers.

Member FINRA & SIPC
This email and any files or attachments transmitted with it may contain confidential or privileged information and are intended solely for the use of the intended recipient. If you are not the intended recipient, please do not copy, retain, disclose or use any part of the message or its attachments. Please notify the sender immediately by return email and destroy or delete any copies. Dissemination or use of this information by anyone other than the intended recipient is unauthorized and may be illegal. Communications by email cannot be guaranteed to be secure or error-free. Emails and their attachments are subject to being intercepted, becoming corrupted, getting lost or delayed, or may contain viruses. Therefore, neither the sender nor Berenberg Capital Markets LLC (BCM) accepts any liability for any errors or omissions in the content of this message or problems in its transmission, including those arising as a result of its transmission over the internet.
BCM does not assume liability for the correctness and completeness of all information given and/or attachments contained herein. The provided information has not been checked by a third party, especially an independent auditing firm. BCM explicitly points to the stated date of preparation. The information given can become incorrect due to passage of time and/or as a result of legal, political, economic or other changes. BCM does not assume responsibility to indicate such changes and/or to publish an updated document. Any document(s) or attachment(s) is meant exclusively for institutional investors and market professionals, but not for private customers. It is not for distribution to or the use of private investors or private customers.
In light of upcoming regulatory changes, please be informed that BCM will continue to share information with you until unsubscribe@berenberg-us.com receives your termination/deletion request. For more information about the General Data Protection Regulation (GDPR) and our privacy policies please refer to https://www.berenberg-us.com/legal-notice. BCM reserves all the rights in this communication. No part of this communication or its content may be rewritten, copied, photocopied or duplicated in any form by any means or redistributed without BCM’s prior written consent.
The information contained herein and sourced may have been adopted from various news sources, for example, Bloomberg, Reuters, Street Account and various other sources. BCM does not claim accuracy, completeness, timeliness, suitability, or otherwise regarding all the information on the securities, stock markets, or developments referred to within. On no account should the Content be regarded as a substitute for the recipient procuring information for himself/herself or exercising his/her own judgments. BCM is not responsible for any recipient(s) use of this information. This Content is not a solicitation or an offer to buy or sell any of the securities contained herein. This information does not constitute a recommendation or take into account the particular investment objectives, financial situations, or needs of clients. Clients should consider whether any advice or recommendation in this Content is suitable for their particular circumstances and, if appropriate, seek professional advice, including tax advice. The price and value of securities which may be referred to in this Content and the income from them may fluctuate. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain securities.