Retail and Food service sales, ex-gasoline, increased 0.7 percent in a month, and 15.1 percent above August 2020, per the US Census Bureau estimate, which is a sign that economic growth isn’t faltering from the Delta variant.
U.S. retail sales unexpectedly increased in August, likely boosted by back-to-school shopping and child tax credit payments from the government, which could temper expectations for a sharp slowdown in economic growth in the third quarter, said Reuters.
Most school districts started their 2021-2022 academic year in August, with in-person learning resuming after last year's shift to online classes because of the pandemic.
Economists and several Fed Governors had been predicting a slowdown in the third quarter and beyond because of the Delta variant-caused surge in infections, but consumers aren’t buying that, still flush with cash from the rescue packages.
Sales advanced in almost every major retail category in August, and they rose a much stronger 1.8 percent if autos are excluded, said MarketWatch. A widespread shortage of new cars and trucks has depressed sales at auto dealers due to the ongoing computer chip shortage.
This combined with the huge number of job openings, at a series high of 10.9 million on the last business day of July, means that businesses believe the 2021 economy is just beginning to roar.
Predictions of Q3 GDP are all over the map at present because of uncertainty over the Delta variant. The Atlanta Fed’s GDPNow estimate for Q3 growth is 3.6 percent, though a consensus of Blue Chip economists predicts 5 percent Q3 growth. I believe the Conference Board’s forecast is closest to reality. It predicts that US Real GDP growth will slow to 5.5 percent (annualized rate) in Q3 2021, vs. 6.6 percent growth in Q2 2021, and that 2021 annual growth will come in at 5.9 percent (year-over-year).
This is a huge increase, even though its forecast “…is a downgrade from our August outlook and incorporates the larger-than-expected impact that the COVID-19 Delta variant has had on the US economy. Looking further ahead, we forecast that the US economy will grow by 3.8 percent (year-over-year) in 2022 and 3.0 percent (year-over-year) in 2023,” said the Conference Board.
Reuters also reported the National Retail Federation said the rise in sales despite the headwinds reflected the continued strength of the American consumer and the resilience of the nation's retailers.
"We maintain our confidence in the historic strength of consumers and fully expect a record year for retail sales and a strong holiday season for retailers," NRF President Matthew Shay said.
Why? Americans are sitting on at least $2.5 trillion in excess savings accumulated during the pandemic. And wages are rising as companies scrambled to fill a record 10.9 million job openings in July.
Harlan Green © 2021
Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen