There were two important reports on the U.S. economy released this morning. First, retail sales rose for the 4th consecutive month in January, according to new data from the U.S. Census Bureau. Headline retail and food services sales totaled $529.8 billion, a new all-time high and likely helped by cheaper gasoline prices. Even “core” retail sales, which exclude the volatile automobile and energy components, rose by 0.4 percent last month. That was better than expected and due to broad strength across nine of the thirteen major retail categories. Noteworthy gains occurred at building materials outlets, furniture and home furnishing stores, non-store merchants (Amazon), and general merchandise stores.
Altogether this was a welcome start to the new year for the largest component of the U.S. economy, and a combination of a healthy labor market and elevated consumer confidence can help fuel continued spending throughout the rest of 2020. For the latter, a separate report out this morning from the University of Michigan showed that consumer sentiment rose in the first half of February to the best level since March 2018. Surveyed Americans’ opinions of current economic conditions softened but outlooks on the future improved markedly thanks in part to the expectation for further gains in household income and wealth. Surveys of Consumers chief economist Richard Curtin added that “These gains in consumers' economic assessments have also been accompanied by a faint stirring of two powerful sources of uncertainty. First, the coronavirus was mentioned by just 7% [of respondents] when asked to explain their economic expectations in early February. Second, the run-up to the presidential election is likely to focus on the vast changes to taxes and spending programs.” Another poll released this week from Gallup revealed that 61 percent of Americans believe they are better off than they were three years ago, a higher percentage than in prior election years when an incumbent president was running.
Sources: Econoday, U.S. DoC, UoM, Bloomberg, FRBSL