E — Economics

Preview: US Retail Sales For January Will Probably Beat Expectations

17 February, 2021
US March Employment Preview - NFP



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On Wednesday, the Census will release the Advance US Retail Sales report for January. According to the Bloomberg consensus, they should rebound by 1.1% MoM, after falling for the 3rd straight time in December.

→ My proxies suggest that the consensus is too pessimistic:

  • Covid-19 disrupted the usual seasonal pattern
  • Stimulus checks were mainly distributed in early January
  • Favourable weather conditions probably boosted shopping activity
  • Auto sales and gasoline prices will also support the headline

 

 

1. Covid-19 disrupted the usual seasonal pattern of retail sales

Usually, January is the weakest month in terms of non-seasonally adjusted (NSA) sales reflecting a retrenchment from strong holiday sales in the fourth quarter. But this year, Covid-19 was a game changer and completely disrupted the traditional seasonal pattern with earlier promotional sales in September/October and restrictions which gained traction until December. As a result, seasonally adjusted (SA) sales fell for the third straight time in December. Given that several states started easing restrictions as soon as January, the expected pullback this year won’t be as large as expected, especially in a context where households received stimulus checks.

 

2. Stimulus checks were mainly distributed in early January

The WSJ reported that the US Treasury Department has sent out more than $112 billion in stimulus payments electronically in early January, meaning that about two-thirds of the second round of payments approved by Congress was already in households’ bank accounts. The payments ($600 per adult and $600 per child) probably supported retail sales with households (especially those in the lower income range) rushing to spend delayed purchases. Furthermore, according to my estimates, total excess savings over the period [Mar. 2020 – Jan. 2021] should exceed $1.6 trillion.

excess personal savings

 

3. Favourable weather conditions probably boosted shopping activity

Weather conditions were favourable and likely boosted shopping activity. According to the NOAA, “During January, the average contiguous U.S. temperature was 34.6°F, 4.5°F above the 20th-century average, tying for ninth-warmest January in the 127-year record.” In the meantime, “The January precipitation total for the contiguous U.S. was 2.01 inches, 0.30 inch below average, and ranked in the driest third of the 127-year period of record.”

 

 

4. Auto sales and gasoline prices will also support the headline

Data released earlier this month confirmed that both auto sales and gasoline prices will also support the headline. According to Wards data, US new vehicle sales increased by 2.2% MoM to 16.63m SAAR (highest since February 2020). In the meantime, the CPI report for January pointed to a 7.4% MoM spike of gasoline prices.

US new vehicle sales

 

 

All in all, my guess is that retail sales will probably beat expectations, which should reinforce my view that US growth should exceed expectations in 2021 and even top the 5% mark.