But the talking heads said that the consumer is back and jobs are soaring? Retail sales missed expectations for the 3rd month in a row (after the weather rebound was supposed to kick in?) with an unchanged 0.0% print in July (against expectations of a 0.2% rise). This is dramaticaly off the 1.5% growth rate seen in March. Across the board, retail sales were weak with Ex Auto & Gas up only 0.1% against expectations of a 0.4% gain. Department Store sales fell 0.7% MoM. So much for pent-up demand.
So - let us get this straight - Q1 was a disaster because of the weather (but retail sales surged and beat expectations in every month) and Q2 was the pent-up demand rebound and retail sales missed every month and slipped to six month lows.
Here is the breakdown by July retail sales components:
The weakness was particularly pronounced in Department Stores, which dropped -0.7% sequentially:
And the reason why Q3 GDP is about to be revised lower by the Penguin brigade: the retail sales control group posted a tiny 0.1% increase over June, the lowest increase since January when we saw the worst tied plunge since Lehman.
And while "harsh weather" was the spin for weak H1 retail sales, now it is the lack of wage growth's fault, or precisely what we have been saying all along. From Bloomberg:
Retail sales were little changed in July, the worst performance in six months, as car demand slowed and tepid wage growth restrained U.S. consumers.
The slowdown in purchases followed a 0.2 percent advance in June, the Commerce Department reported today in Washington. The median forecast of 82 economists surveyed by Bloomberg called for a 0.2 percent gain. Excluding (RSTAXMOM) cars, sales rose 0.1 percent.
Job growth has yet to stoke the type of wage gains needed to boost household purchases, a sign the economic expansion will probably not sustain the second-quarter pickup into the end of the year. Some retailers must rely on promotions and discounts to entice customers, whose spending accounts for about 70 percent of the economy.
“We’re seeing decent but not great consumer spending,” Christopher Low, chief economist at FTN Financial in New York, said before the report. “Credit is limited and wage growth is stagnant.”
Nonetheless, inflation-adjusted average weekly earnings dropped 0.2 percent in the 12 months through June, the worst performance since October 2012, according to Labor Department data.
Among retailers, auto dealers have benefited from pent-up demand and easy access to credit, with car and truck sales up 6 percent in July from the same month in 2013, today’s Commerce data showed. Purchases cooled last month, falling 0.2 percent from June. At the same time, vehicle sales are on track for their best year since 2006.
Discounts and promotions remain popular. Tanger Factory Outlet Centers Inc. (SKT), based in Greensboro, North Carolina, reports 98 percent occupancy at its discount shopping malls and tenants want to expand their offerings, President and Chief Executive Officer Steven Tanger said.
“The great majority of them are looking to grow their businesses,” Tanger said on an Aug. 6 earnings call. “They tell us they’re allocating more capital to the outlet distribution channel than other distribution channels. So we’re excited about the demand for our properties.”
And since the MSM is finally figuring it out, here is the next punchline: as long as central banks are around there will be no wage growth. We give the MSM the usual 2-4 years before they grasp this final piece of the puzzle.