After an exhausting week, the final big datapoint comes today when July retail sales are unveiled.
BTIG’s Dan Greenhaus sets the scene, explaining why it matters:
On the economic data front, (today) brings what is easily the most important data point of the week by way of July Retail Sales. The Bloomberg consensus is currently looking for a 0.5% increase in the headline number and a 0.2% increase if we exclude autos and gasoline. There are, on this front, a couple of important things to note:
- This is a July data point so it matters for third quarter GDP. Spending ended the quarter horribly so we hope to see some pickup in July as hopes for August should probably be tempered (the debt crisis/stock market collapse).
- For the month, we know that auto sales perked up following the Japanese related disruptions. As such, a better than expected headline number would not surprise us
- We know that the price of gasoline rose in July which suggests firmness in that category as well
- Excluding autos and gasoline, which will be influenced by the above factors, sales are expected to be weak. We know that July chain store sales were weak and we know from the University of Michigan consumer survey that sentiment was lower in July than June while it also appeared to worsen as July progressed
GDP in the second half of the year is likely to grow somewhere closer to 2% than the 3% we were originally anticipating (this is even worse when one considers that today’s trade data is likely to lead to downward revisions to the already weak Q2 GDP report). Part of the reason is because personal consumption is now expected to grow about 1.5% in each of the next two quarters. While there is a limit to what can be reasonably expected out of the consumer, a better or worse than expected retail sales number tomorrow morning will be instrumental in helping decide the “recession or not” debate.