Good News: Real Retail Sales Dropped Fractionally In The Past Year

Published Friday, July 15, 2022 at: 7:57 PM EDT

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Retail sales climbed by +8.8% in the 12 months through June, according to the release Friday at 8:30 a.m., by the Census Bureau. The news brightened the near-term economic outlook, and it sparked a +1.9% one-day surge in stock prices.

The sharp rally in stocks followed Wednesday’s worse-than-expected inflation release showing the Consumer Price Index (CPI) soared +9.1% in the same 12-month period through June. To be clear, the +8.8% retail sales surge, after adjusting for the +9.1% CPI, meant real retail sales in the past year were slightly negative -- down three tenths of 1%, and the stock market shot up nearly +2% on that news. 

Retail sales are crucially important to U.S. growth. Seventy percent of U.S. growth is consumer-driven and retail sales reflect 30% of all consumer activity. So why would negative growth be positive news and drive a sharp one-day rally?  

As we said in our weekly report two weeks ago, the worst of the economic news may already have been discounted in stock prices. No one can predict a market bottom, but the economy is not falling apart and it’s still possible that a recession may not occur.

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The Standard & Poor’s 500 stock index closed this Friday at 3,863.16. The index gained +1.92% from Thursday and +0.93% from last Friday. A proxy of America’s global economic leadership, the S&P 500 is up +53.29% since the Covid-19 bear-market low of March 23, 2020, and down -21.55% from the January 3rd all-time high.


Nothing contained herein is to be considered a solicitation, research material, an investment recommendation, or advice of any kind, and it is subject to change without notice. Any investments or strategies referenced herein do not take into account the investment objectives, financial situation or particular needs of any specific person. Product suitability must be independently determined for each individual investor. Tax advice always depends on your particular personal situation and preferences. You should consult the appropriate financial professional regarding your specific circumstances. The material represents an assessment of financial, economic and tax law at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete, and is not intended to be used as a primary basis for investment decisions. This article was written by a professional financial journalist for Advisor Products and is not intended as legal or investment advice.

This article was written by a veteran financial journalist based on data compiled and analyzed by independent economist, Fritz Meyer. While these are sources we believe to be reliable, the information is not intended to be used as financial advice without consulting a professional about your personal situation.

Indices are unmanaged and not available for direct investment. Investments with higher return potential carry greater risk for loss. Past performance is not an indicator of your future results.

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