Retail sales give the first tentative signs that lower fuel and utility prices are not filtering through to the economy
I’m still erring on the side of caution that we’ve yet to see any real effect of lower energy prices showing up in peoples pockets and any effects of that money being spent elsewhere.
We possibly should have seen perhaps a small amount of that showing up in the Dec retail numbers, particularly considering it covers the holiday period. To me it says two things,
- Overall prices at the consumer level haven’t matched, or been considerably lowered than, wholesale prices
- The US consumer is still so strapped for cash that the savings they’ve made aren’t acting as a bonus to be spent on elsewhere, either on necessities or more frivolous or big ticket items
It’s an early sign of a potential problem at ground level for the US economy and one that needs to be watched very carefully over the next couple of months. Any signs that the economic pick up is not hitting the consumer level risks derailing the domestic side of the economy and will put very serious pressure on the Fed and rate hikes.
Tomorrow we get the first signs of January’s manufacturing picture via the Empire State and Philly Fed surveys. Much like the retail data today we’ll want to see signs that the lower commodity prices are going to act as a boost to the economy.
