Relationship Between Retail Spending & Rent

Aug 31, 2022 | Ask "Z" Economist, No Bull Economics

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Executive Summary: The retail sales number came in flat on a sequential month/month basis during July, giving pause to the idea that all is well with the consumer. Results were particularly notable given that consumers saved $1.2B from lower gas prices in July compared to June, but this didn’t translate into higher retail spending elsewhere. Consumers also cut back on automotive-related spending (maybe because persistently high gas prices are spooking would-be car buyers) which represents an important industry (with the highest % of total retail spending). At least online shopping continues to gain momentum with a +2.65% m/m and +20% y/y increase even though people are supposedly eager to get back to the stores post-covid. 

Retail and Food Service Sales Graph

In any case, it’s almost certain that retail spending has been pressured by rent increases which have been going through the roof (up +22% y/y in July) as Fed rate hikes price out more and more people from home ownership. Ultimately, the Fed may have to choose between rent control or rate cuts, and we vote for the latter! 

CPI Graph

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