U.S. Markets open in 4 hrs 54 mins
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

Consumers have 'substantial ammunition' to spend: analyst

Brian Sozzi
·Anchor, Editor-at-Large
·3 min read
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

Investors shouldn't let a very underwhelming February retail sales report get them down — the fact is that many U.S. consumers have massive financial firepower to "spend, spend, spend" this year and help dig the economy out of the COVID-19 driven hole.

For its part, Deutsche Bank economists said in a new research note Tuesday it expects U.S. GDP to hit 7.5% growth this year in large part because of favorable dynamics around consumer finances.

"This rapid pickup in growth will be led by consumer spending, fueled by another massive fiscal infusion from the near-term distribution of USD1,400 stimulus checks as well as an extension of expanded unemployment benefits through the end of August. In addition to this upcoming fiscal support, households already have, at least in the aggregate, substantial ammunition to support robust consumer spending," said the Deutsche Bank team of David-Folkerts-Landau and Peter Hooper.

"Indeed the household saving rate currently sits near 20% and households have accumulated around USD1.6 trillion in excess savings since the pandemic hit. Moreover, in sharp contrast to past recessions, household wealth has remained sturdy and actually moved to new highs as a share of income, as equities are at records and home prices have accelerated sharply," they added. "These wealth effects could, at the margin, also support consumer spending."

Those nuggets of wisdom from Deutsche Bank do appear to be going overlooked right now, however.

Consumers have ammunition to spend online and the malls, suggests Deutsche Bank.
Consumers have ammunition to spend online and the malls, suggests Deutsche Bank.

The Dow Jones Industrial Average fell 125 points in afternoon trading Tuesday in the wake of a lackluster read on retail sales.

Retail sales fell 3.0% in February over January, falling short of estimates for just a 0.5% drop, based on Bloomberg consensus data. This followed a rise of 7.6% in January, which was revised sharply higher from the 5.3% monthly gain previously reported.

February's decline marked the largest drop since April last year at the height of pandemic-related stay-in-place orders, Yahoo Finance's Emily McCormick reports. Excluding auto and gas sales, retail sales fell even further, dropping 3.3% after an 8.5% increase in January. Sales fell in most categories, including online.

But it's likely the weak read on retail sales will be written off in short order for several reasons. For one, bad weather in states such as Texas probably weighed on consumer spending. Meanwhile, as Deutsche Bank points out many consumers are sitting on high levels of cash — especially after the latest round of stimulus checks.

"The story last month was some combo of stimulus payments rolling off and storms weighing on consumer spending. The early data already show that March is off to a solid start," said RenMac head of economics Neil Dutta.

Yahoo Finance's Emily McCormick contributed to this story.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

What’s hot from Sozzi:

Watch Yahoo Finance’s live programming on Verizon FIOS channel 604, Apple TV, Amazon Fire TV, Roku, Samsung TV, Pluto TV, and YouTube. Online catch Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, SmartNews, and LinkedIn.