What's going on?
Data out on Thursday showed US retail sales unexpectedly rose in August, thanks in large part to an A+ effort from back-to-school shopping.
What does this mean?
Retail sales climbed 0.7% last month compared to the same time last year, which was a far cry from the 0.7% drop analysts were expecting (tweet this). And they’d have been even higher – 1.1% higher to be precise – if not for anemic car sales. There were a couple of reasons they were so strong: the spread of the Delta variant, for one, has put people off taking vacations, leaving them with more money to spend elsewhere. And then there was the $15 billion the government has spent supporting parents, which will have come in real handy for August’s back-to-school shopping season.
But there’s a problem: restaurant and bar sales didn’t rise in August, which suggests there are still gaping holes in this economic recovery. Goldman Sachs, then, might’ve been right earlier this month when it slashed its forecast for US economic growth from 6% to 5.7%.
Why should I care?
For markets: We’re on dangerous turf.
Between Delta-induced uncertainty, China’s manufacturing difficulties, and the high prices of labor and materials, American companies aren’t exactly on stable ground either. In fact, most of their stocks have fallen more often than they’ve risen in the last few months – something analysts see as a clear sign of a weakening market.
For you personally: What goes around…
The last thing American companies need to contend with is higher taxes, but higher taxes might be exactly what they’re going to get: the US government took a step toward approving tax hikes on Wednesday, with a view to make an extra $2.1 trillion in revenue. Good for the government, sure, but not necessarily so good for companies, investors, or shoppers: businesses will either have to accept lower profits, or they’ll need to make up the shortfall by raising prices on you.