ING: Retail Sales Miss Reflects Rebalancing Toward Services

ING saw the below-consensus July retail sales data as "a modestly disappointing outcome, although not a calamity".

• They point to the likelihood that with the reopening of the economy, U consumers are rebalancing away "away from 'things'...and toward 'experiences'" - in other words increasing services spending (not captured by retail sales) at the expense of goods spending. Retail sales make up only 40-45% of total consumer spending.
• They expect retail sales to continue underperforming "wider spending patterns", but that both goods and services will continue to grow, with household finances in good shape.
• Weak consumer sentiment (seen in last week's UMichigan reading) potentially reflecting the Delta COVID wave and inflation eroding purchasing power "presents downside risks for August activity readings".