July Retail Sales figures disappointed expectations by dropping 1.1% MoM from June.
The Mid-term hypothesis:
A drop in US Retail Sales figures on a monthly basis is almost a given and expected.
Since Retail Sales is major contributor to GDP – which is typically measured as a YoY % - that is also the appropriate metric for RRS ( Real Retail Sales)
On a YoY basis July 2021 Retail Sales growth was a stellar 13.3%. And on a rolling 12 month basis – RRS has grown a staggering 14.3%
This compares to the 2 Long Term Rates from economic expansions in the 1990s-2007 and 2010-2019 pre-pandemic hit –They are 5.5% for ‘90-’07 and 3.9% ‘10-’19 periods on a median basis
ie Current Sales growth is almost running at 3x – this is reason why most 2021 US GDP estimates are 6%+. Majority of this is driven by the liquidity due to the direct consumer stimulus due to the pandemic from the government
A natural reversion to the Mean ie Long term rate is to be expected and since current figures sits well above that – that means additional Economic expansion
