The problem with US retail sales
The June report is due on Friday
The US consumer will be in focus on Friday with retail sales followed by the UMich consumer sentiment survey.
Retail spending is a tailwind for the US economy overall but this chart shows how sales have disconnected from the historical trend.
This chart shows sales about 14% higher than trend and that gap could narrow quickly.
The problem is that retail sales don't include travel and accommodation spending. A big chunk of that spending is returning now after it was redirected towards durable goods. Some of that drop will be buffered by higher fuel costs and restaurant spending (which is included). That measure was back to pre-pandemic levels last month but it's a fair assumption to expect an overshoot for a number of months on pent-up demand.
We will also see a reversal in the coming months of the absurd rise in spending on used vehicles.
The market is going to be carefully watching this number on Friday but don't focus on just the headline. Dig into different reopening categories to try and get a sense of how much pent up demand is being released.