Retail sales were in-line with expectations last month, while the prior month’s readings were revised higher. The big question out of this report centers around tariffs – and whether consumers were doing their best to front-run potential price hikes as a result of the ongoing trade war, observes Bret Kenwell, US investment analyst at eToro.
That certainly appears to be the case when looking at auto sales and auto parts dealers, which rang up strong sales and accounted for the largest category within the overall retail sales report. Electronics and building materials also saw a jump.
Source: Trading Economics
Like other corners of capital markets, volatility and uncertainty are materializing in economic reports. That’s fueling the increase in uncertainty we saw throughout the first quarter.
The prior month’s control group sales were revised higher from 1% to 1.3%, while the March tally of 0.4% missed estimates of 0.6%. Control group sales — the component that’s used to calculate GDP — often serve as a better gauge of true consumer spending. Given that consumption is the largest component to US GDP, investors need to see this segment hold strong. This would signal that the consumer is not yet faltering despite the global trade war.
Right now, investors are facing a scenario where consumer and business confidence have been sinking and there’s a fear that it will weigh on spending and hiring. If that doesn’t end up being the case, stocks can eventually enjoy relief...if and when there’s more trade war de-escalation. However, if this fear does come to fruition, then uncertainty will increase, alongside short- to intermediate-term risk.
