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THE RETAIL SALES CRASH: Why Every Single Forecast Was Dead Wrong!
•Wall Street Truthbombs
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The U.S. government released July Retail Sales data showing a 0.6% contraction—the steepest monthly spending drop in over a year—missing every single economist forecast on Wall Street. In today's Wall Street Truthbomb, Chief Investment Officer Mark Malek reveals the hidden cracks in the consumer economy right as the stock market trades at all-time highs.
Mark breaks down the shadow data across the Census Bureau's report, revealing a 2.2% plunge in online shopping, a 1.8% drop in motor vehicle sales, and a 0.4% decline in the core control group that feeds directly into GDP math. Discover why the post-tax-refund spending buffer has run dry, why headline stock indexes are masking Main Street fatigue, and what a contracting consumer means for corporate revenues heading into the fall.
Truthbombs videos are for informational and entertainment purposes only. The views expressed by Mark Malek or guests are their own and do not necessarily reflect those of Siebert Financial. These videos do not constitute investment advice, an offer to sell, or a solicitation to buy any securities. Past performance is not indicative of future results. Listeners and viewers should consult a qualified financial professional before making any investment decisions.
On Friday morning, the government dropped a retail sales number that missed every single economist's forecasts, and most of Wall Street barely blinked. By the end of this video, you're going to know exactly how bad Friday's retail sales report really was, why the headline number actually hides how bad it was, and what it tells you about the American consumer right when everyone assumed, well, that they're fine. Here's where everyone's head was walking into this week. Inflation is cooling, the stock market just hit a record high. The story everywhere has been soft landing, soft landing, soft landing. I've heard it so many times. And soft landing only works if the consumer keeps spending. So the whole story quietly assumes one thing that the person swiping the card at the register is still fine. I was in the elevator heading up to my office right as the number hit my phone at 8.30 a.m. on Friday, and I watched the doors open on a floor that had no idea what had just landed. Retail sales for July came in down 0.6% from June. Economists expected a gain of about 0.1%. Not one forecaster in a survey of more than 50 economists predicting a number this week. The entire range of guesses ran from down 0.5 to up 0.7. The actual number came in below all of them. That's not a miss, my friends. That is everybody being wrong in the same direction at the same time. And it's not a small miss either. This is the biggest one-month drop in retail sales in more than a year. You have to go back to the start of last year to find a month this week. Now, we're gonna get deeper. Of course we do. But before I dive in, if you like this type of content, please click like. Don't forget to subscribe. It's important to be in the know. And this, my friends, is exactly how you do it. Okay, here's why the headline number is actually the nicest way to tell this not so nice story. Strip out autos, and the number is still down 0.3%. Again, against expectations for a gain. Strip out autos and gas too, and it's still negative. And the number that economists actually use to estimate how much consumers are adding to economic growth, called the control group, fell 0.4% against an expected gain of 0.3%. That same control group number for June got quietly revised down also from a gain of 0.5% to a gain of 0.4%. So this isn't just one week month sitting next to a strong month. The month behind it got worse too once the revisions came in. Look at where the damage actually showed up. Let's have a look. Car sales fell 1.8%, the biggest single drag, but there's the one that should actually get your attention. Online and other non-store retailers, you know what that is. The part of this economy that has basically only gone up for years fell 2.2%. That's not a rounding error, my friends. That's discretionary online shopping getting pulled back hard in a single month. And gas station sales fell 0.9%, even though pump prices were still sitting well above where they were earlier in the year. And the dollar amount spent at the pump goes down while the price per gallon is still elevated. Well, that means people are actually buying less gas. They drove less. That's real behavior changing, not just the price effect. In dollar terms, total retail sales fell from $768.1 billion in June to $763.6 billion in July. That's real money that didn't get spent. I want you to hear those numbers because, again, it's real numbers. That's roughly $4.5 billion that would have otherwise shown up in somebody's register. It's not just an abstract percentage somewhere on an economist's computer. Here's my read on why. April and May were unusually strong months for retail, months where a lot of households had tax refund cash sitting in their accounts, and they probably spent it. That's a one-time boost. That's a new baseline. It's not a new baseline. Sorry. Once that refund money gets spent down, spending has to come back down to whatever people are actually earning. This looks like that come down showing up all at once. And I want to be careful here, though. That's my own read connecting the dots, not something the government itself spelled out in this morning's release, but it lines up with the same explanation that got used for June softness, also, which means this might be a two-month trend, not a one-month accident. Now, here's why the control group number matters more than any other line in this whole report. It's the specific slice of retail spending that feeds directly into how the government calculates overall economic growth each quarter. When that number goes negative and the prior month gets revised lower on top of it, that's not just a retail story, my friends. That's an early signal that shows up in GDP math before most people even notice something changed. So what does this actually mean for you? First, don't panic off one month. One week print isn't a recession signal by itself. And the stock market hitting a record high the same week tells you investors aren't treating this as a crisis either. Retail sales data is also notoriously noisy month to month and gets revised often. We just saw June get revised lower on Friday. The right move is to watch the next one or two months of data, not to overreact to a single report. Number two, pay attention to that control group number specifically. That's the one that feeds directly into how economists estimate overall economic growth. Two week months in a row there, one original and one revised down, is worth watching closely going into the next GDP read. Third, this is a good reminder that a record high stock market and a healthy consumer are not always the same story. Stock market is driven heavily by a handful of huge companies and their earnings and by households wealthy enough to own a lot of stock in the first place. The retail sales report is driven by millions of ordinary households, people like you and me, deciding whether they can afford to spend this month. People who don't feel a record high in their checking account. Those two groups can drift apart for a while before anybody notices it. And when they do, it usually shows up first in a report, well, just like this one, which is why I'm always bringing up this sleeper retail sales. Quietly, it shows up uh usually month before it shows up anywhere else, my friends. That's the gap that nobody's pricing in yet. There's no free lunch on Wall Street. I say this all the time. And the bill for two months of tax refund fuel spending just came due. That's not a free lunch. The headlines this week were all about record highs and cooling inflation. The retail sales report on Friday morning is the quiet reminder that person, the person actually paying for all of this, including the lawn guy who you just heard zip by my house, the everyday consumer may be more tapped out than the headlines are letting on. So, your truth bomb for today is this retail sales didn't just miss this morning, they missed every single forecast on the board. And the weakness showed up exactly where discretionary spending lives, which means the record high stock market and the everyday consumer may be telling you two completely different stories right now. My friends, join me every day for Wall Street Truth Bombs, where I drop them right here before the market figures them out.
