Today, JP Morgan, one of the Portfolio Strategists we utilize for client accounts, wrote the following about the August retail sales numbers…
August retail sales rose by 0.6% relative to July, marking the slowest monthly increase since sales troughed in April, when most of the economy was shut down to stop the spread of COVID-19. As shown in this week’s chart, sales in sectors such as groceries and nonstore retail (which is primarily composed of online retailers) were boosted by stay-at-home restrictions and are above pre-pandemic levels. By contrast, while sales in restaurants and bars rose a strong 4.7% last month, reflecting a gradual resumption of their activities, they remained below levels seen in February.
This suggests that the services sector is still under pressure from social distancing behavior. On a year-over-year basis, retail sales are up by 2.6%, but momentum slowed in August, coinciding with the expiration of the $600 extra weekly unemployment payments. While consumer spending on goods should continue to look healthy in the months ahead, services spending will likely remain depressed until we see the widespread distribution of a vaccine. This should contribute to a general slowing of the economic recovery, suggesting that long-term investors should continue to focus on portfolio diversification.
