Tim Hoyle, CFA, Co-Chief Investment Officer
thoyle@haverfordquality.com
Never Count the U.S. Consumer Out
Last week, the Census Bureau released advance estimates of U.S. retail and food services sales for July 2020 which increased 1.2 percent from June, and 2.7 percent versus July 2019. Retail trade sales increased 5.8 percent from last year while non-store retailers, such as e-commerce retailers including Amazon, were up 24.7 percent. Food and beverage stores sales increased 11.1 percent from last year. Retail sales are back to pre-pandemic levels, despite continued uncertainty and depressed consumer confidence.
Part of this strong rebound can be explained by where consumers are not spending their money. Income that might normally be spent on airline travel, hotels, concert and sporting events, and commuting costs such as train travel, have given consumers some extra cash in their pockets. These categories are not included in the retail sales data.
Additional data released this week by the Census Bureau appears incongruent with the strong retail sales data. Their Pulse Survey has attempted to measure how the pandemic has toppled our lives. According to their results, 50% of households have experienced a loss of employment income, 26% of survey respondents are experiencing housing anxiety[i] and 40% of adults have delayed receiving medical care during the pandemic.
One need looks no further than government stimulus to help explain the dichotomy of Census Bureau data. However, the vast majority of direct to consumer stimulus funds ended on July 31, and Congress left for vacation without providing any new solutions. We viewed this as a potential risk several weeks ago and are surprised markets have not react to the impasse with lower prices. This week we will receive additional insight into the state of the consumer, as several high-profile retailers will report results for their July quarter end.
[i] Percentage of adults who missed last month’s rent or mortgage payment, or who have slight or no confidence that their household can pay next month’s rent or mortgage on time. https://www.census.gov/data-tools/demo/hhp/#/?measures=HIR
Quarterly Revenues of Retail Companies Reporting Results this Week, $ billions
