After the covid driven pause, American consumers played a crucial role in staying strong and helping in economic recovery with their spendings. However, just before the approach of the holiday season, the momentum is fading away.
The chart of the days report on retail sales boom compares the retail trend before and after the covid pandemic. The spendings took a hit in 2020 spring during the covid pandemic before the trajectory moved upwards and eventually hit a record high. The stimulus played a significant role, boosting the savings rate, which was a record high, even more than what was seen in the great depression austerity.
The effect of the stimulus is wearing out, and the savings rate as a percentage of disposable income is back to 2019 levels. The tailwinds pushing the spending booms have eased, and the momentum waned. This scenario has resulted in the trendline being flatter on a YTD basis.
As per Bloomberg News, the retail sales expected 0.8% rise in November fell short as it rose only 0.3% compared to October. The Nasdaq futures and the treasury yield dipped with investors’ knee-jerk reaction to go defensive. The year data was crucial as it expected the demand to be pulled forward from December due to anticipated supply chain bottlenecks and shipping delays. The economists are wondering if October showed up some of those demands.
The data serves as a yardstick on how diminishing wages and rising inflation weigh the American consumer spending habits during the holiday season gift-buying period that is typically strong for retailers. The results are not encouraging when one considers the inflation-adjusted figures of the CPI data; the sales growth is actually negative.
The pandemic era saw the sustained ability to spend was a typical American story. In China and Europe, the sales data shows the pre-pandemic levels. The momentum faded there some time ago as Europe focussed more on job retention programs instead of providing stimulus. At the same time, China was affected by the lockdown policies.
The Chinese data showed a 3.9% retail sales growth annually, falling short of the projected 4.7%. The industrial output was higher at 3.8% against the estimated 3.7%. The exports are also showing records.
The U.S. is typically a consumer-driven economy, and the country’s fiscal stimulus helps domestic and global activity. However, it is to be seen whether the American consumer can lead the charge against the backdrop of rising inflation and waning fiscal support. Or this could be the first sign of global degrowth.
