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Hot Potato Money in Play as Retail Sales Unexpectedly Flop

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21 comments on Hot Potato Money in Play as Retail Sales Unexpectedly Flop

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Advance Retail Sales Details 

  • Advance estimates of U.S. retail and food services sales for April 2021, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $619.9 billion, virtually unchanged from the previous month, and 51.2 percent above April 2020. 
  • Total sales for the February 2021 through April 2021 period were up 27.1 percent from the same period a year ago. 
  • The February 2021 to March 2021 percent change was revised from up 9.7 percent percent) to up 10.7 percent.

What Happened

Retail sales blasted higher in March and revisions added to the impact. 

There were three rounds of Covid stimulus, a year ago under Trump, then in January and March under Biden.

Sales Consensus vs Actual

  • Retail Sales Consensus +1.0%, Actual +0.0%
  • Ex-Vehicles Consensus +0.8%, Actual -0.8%
  • Ex-Vehicles and Gas Consensus +0.7%, Actual -0.8%
  • Control Group Consensus +0.1%, Actual -1.5%

Hot Potato 

Economists expected the surge to continue to continue in April but look at what happened.

Free money stimulus is like a hot potato. As soon as you give away free money people spend it then the effect quickly vanishes.

QE Did Not and Will Not Spur Bank Lending

The Fed Wants to Stimulate Bank Lending, Charts Show the Fed Failed

Psychology of QE vs Spending

As far as the tock market goes, the Psychology of QE is Far More Important Than the Amount of It

Spending is another matter.

What’s Biden going to do for an encore?

Mish

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21 Comments
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FromBrussels
FromBrussels
4 years ago
Looks like uncle Joe will still have to dig a bit deeper  into his pockets…. 
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Maximus_Minimus
Maximus_Minimus
4 years ago
What if all the money missing from retail went into stowks, housing and bitcoin?
That will make everybody rich, according to central banking gurus.
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Eddie_T
Eddie_T
4 years ago
Looks like the markets shrugged this one off. Not like the headline inflation scare. Gold and stocks rebounding together, dollar falling again, ten year yield too. Everything is great again. It will be interesting to see if the S&P can make a new high next week. 
I’m in the green on the fun trade in GLD and letting it ride for a while. I doubled my tiny position this week, and plan to keep adding as long as the trend is my friend. I intend to build it into a more significant position over the next year.
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Dr. Manhattan23
Dr. Manhattan23
4 years ago
Let’s see what happens when all the stimulus ends, the moratorium on evictions is lifted, and people are required to pay their school loans and mortgage. Im not so sure everything will be so rosy. The damage done by shutting everything down isn’t so easy to fix
I almost forgot the possible tax increases
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Mish
Mish
4 years ago
A reader asked for a long-term chart.
In general, long-term charts of monthly seasonally-adjusted annualized numbers are a mess and not very useful. That especially applied to Covid-19 impacts.
I cannot post a chart directly here so will investigate a change. The workaround is to put it in a Tweet.
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PreviouslyAndaetc.
PreviouslyAndaetc.
4 years ago
Reply to  Mish
Thanks.  The idea was more to get an idea of how spending now compares to same month (say 2019) – that is to say did the extra cash just boost consumption to close to normal level. If so that maybe says that prices are going to remain at current levels etc. if the economy picks up by itself. I know all the data is a mess to work through now, actually I haven’t seen anywhere try to put it into perspective properly yet,  which isn’t surprising given there are so many structural changes. 
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shamrock
shamrock
4 years ago
“What’s Biden going to do for an encore?”
Hopefully nothing.  Inflation is already out of control.
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Doug78
Doug78
4 years ago
I do follow announcements about new investments by medium-sized companies and where they invest. I did notice a drop-off after Biden revealed his tax plans. There was no drop off after Biden was elected but one after the tax plan came out. Originally I thought that it would come back since his plans have little change of passing the Senate but maybe I was hasty. Perhaps they are waiting for the midterms before investing.   
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Carl_R
Carl_R
4 years ago
Mish, I have a question for you. On the chart of “bank lending”, how are PPP “Loans” factored in? Do the loans show up on the books of banks until forgiven? Or do they come right off the books of the banks, replaced with money from the government?
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Mish
Mish
4 years ago
Reply to  Carl_R
Pretty certain PPP loans are not bank loans
Most mortgage loans are not either  
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Eddie_T
Eddie_T
4 years ago
Reply to  Mish
PPP loans are bank loans. I got mine from Wells Fargo. Not sure whether they show up with normal loans on the books, however.
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Doug78
Doug78
4 years ago
Saying as a new president that you are going to vastly increase taxes might give some people good reason to rethink starting investing in Plant, Property  and Equipment.
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whirlaway
whirlaway
4 years ago
Reply to  Doug78
Rrriiiiight.  Just  like cutting taxes made people fall over one another to invest in plant, property and equipment!  LOL.  
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Doug78
Doug78
4 years ago
Reply to  whirlaway
Actually it did back in the early 80’s. Tax cuts in the 2000’s didn’t have the same effect because the utility of further tax cuts became marginal once a certain lower level was reached. Develop your idea further and we can talk about it.
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whirlaway
whirlaway
4 years ago
Reply to  Doug78
Even those didn’t work to the extent they were advertised.   The claim was that the tax cuts would cause so much growth that the tax receipts would skyrocket and the deficits would vanish.   The reality was that they didn’t cause that much growth, didn’t lead to any big increases in tax receipts and blew a big hole in the deficits, taking the debt from 0.8T to 3.2T over that decade.
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Doug78
Doug78
4 years ago
Reply to  whirlaway
Your statement was about PP and E and not about the government deficit. Regan’s lowering the tax rate did stimulate Investment in PP and E which had been stagnating in the decade before and it worked very well. Much of the deficit came about because of a surge in defence spending to roll back the Soviet Union’s perceived gains over the West the previous decade.
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whirlaway
whirlaway
4 years ago
Reply to  Doug78
LOL.   Yeah right.  Reaganomics stimulated PP and E so much that manufacturing plummeted during the 1980s. FYI, the term “Rust Belt” was coined during that decade.
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Zardoz
Zardoz
4 years ago
Reply to  Doug78
Or stonks.
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PreviouslyAndaetc.
PreviouslyAndaetc.
4 years ago
“As soon as you give away free money people spend it then the effect quickly vanishes.”
Depends, on if people are paying down debt/adding to savings. If money is spent repeatedly then it would add to totals. Comparison to 2019 would be  useful,  current charts are all going to be quite odd without other reference. 
New site is quite clean, the text that also includes adds before comments (on mobile) is annoying/clutters. Also on main page number of comments listed next to article was useful,  you could tell if there were replies going on. 
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Mish
Mish
4 years ago
Reply to  PreviouslyAndaetc.
The long term chart is a mess, I created that chart today and truncated it.
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PreviouslyAndaetc.
PreviouslyAndaetc.
4 years ago
Reply to  Mish
Thanks, I replied above. 
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