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Can QE Boost Retail Sales Forever?

John Blank


According to the latest retail spending reports, the Fed’s Quantitative Easing program continues to deliver a positive feedback loop between the U.S. consumer and the U.S. stock market. 

Each month, the U.S. Commerce Department mails questionnaires to a sample of 5,000 firms selected from its larger Monthly Retail Trade Survey (:MARTS). Firms responding to MARTS account for approximately 65% of total national sales.

With a rising stock market as its major tailwind in April, the latest retail sales report showed U.S. consumer spending did not softened as much as forecasters had expected.

On Monday morning, the Commerce Department reported an overall seasonally adjusted +0.1% rise in April retail sales.  But U.S. retail spending actually climbed +0.7% in April when gasoline at the pump is excluded. Forecasters were looking for a -0.6% decline in retail sales.

From a year ago to April, retail sales have risen +3.7% annually. 

·         The internet continues to be the overwhelming growth leader.  Non-store retailers (aka the internet) were up +15.4% annually. 

·         Cyclical activity was also strong.  Auto sales were up +8.8% annually.

Sales at gas stations sank -4.7% to mark the biggest decline in more than five years. 

·         Consumers evidently used some gas savings to boost spending on electronics, clothes and hobby items, among other things.

·         They also increased spending at bars, restaurants and internet shopping sites.

·          Aside from gas, the only categories to see a decline in spending were groceries, liquor and personal-care stores.

In March, a decline in retail sales was revised down to -0.5% from -0.4%. In February, an increase in retail sales was revised up a tick to +1.1%. 

The RTI question I have for you today is this one? 

Can positive feedback loops from the U.S. stock market continue to overcome headwinds of federal budget sequestration, personal tax increases, and a weak international economy?



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