Retail sales increased 0.7% in July, better than expected as consumer spending is holding up
Retail sales increased 0.7% in July, better than expected as consumer spending is holding up
The advanced retail sales report showed a seasonally adjusted increase of 0.7% for the month, better than the 0.4% Dow Jones estimate
The advanced retail sales report showed a seasonally adjusted increase of 0.7% for the month, better than the 0.4% Dow Jones estimate. Excluding autos, sales rose a robust 1%, also against a 0.4% forecast. Both readings were the best monthly gains since January.
It seems as long as consumer spending remains strong the risk of recession is low despite the rapid Fed rate hikes.
One thing I haven't seen anyone discuss in the context of the current economic climate is that while we had near-0% effective rates from 2008 to 2022, we had sub-1% APRs on auto loans, sub-3% APRs on mortgages, and 0% APR payment plans through manufacturers and POS systems became common. Google, Apple, Amazon, Shopify, more, all implemented 0% APR payment options for devices and even general purchases for 6~12 month terms. I was looking at laptops just last week and notice Apple is still allowing 1 year 0% APR plans for them. The iPhone upgrade program doesn't seem to have gone anywhere. It seems to me this is probably still a pretty big driver of inflated consumer spending - it's objectively a better deal to not spend the money up front when the fed rate is 5.5%, money market funds are paying 5.4%, HYSAs are paying 5.1%, and inflation is 4%. Of course you should spend the money a year from now when it's grown more and worth less.
It’s true that inflation presents an arbitrage opportunity, but I seriously doubt the average consumer is thinking with anything close to that level of sophistication. I mean, most consumers leave debt sitting on their credit card instead of paying it off when they can.