Shopaholics, US Retail – Commerzbank

US consumers are turning out to be true shopaholics, notes Ulrich Leuchtmann, head of FX and commodity research at Commerzbank.

Retail sales rose 1% versus 0.4% expected

“In July, retail sales rose 1 percent, the Census Bureau reported yesterday. Analysts expected a weak 0.4%. Subcomponents of special interest were also significantly stronger than analysts expected. And because it is now a truism that the US consumer is the ‘engine of the US economy’, the retail sales numbers have helped at least offset some of the USD’s weakness in recent days.”

“We don’t think the US economy is slipping into a recession either. In our view, therefore, the market reaction was not wrong. However, I would like to emphasize that yesterday’s numbers were not proof of one view of the US economy or another. In a hypothetical future recession, the US labor market would certainly suffer damage with only a time lag. And only then does the American consumer usually notice.”

“Remember Tom and Jerry? In the cartoons, you often see Tom the cat run over a cliff and continue to run in the air for a moment, before crashing even harder. If the US economy were to go into recession in the near future, it seems plausible to me that US retail sales would exhibit similar behavior. In short, yesterday’s strong number isn’t foolproof proof of a robust US economy in the near future. But it is a necessary condition for this vision.”