Latest / Markets with Megan: A Quick Financial Markets Update / Retail Sales & the Hidden Inflation Story | S2 E078 | 09-16-25
Transcript
- 0:01Megan Horneman: Another somewhat confusing day for the Federal Reserve when it comes to economic data.
- 0:05Megan Horneman: It is Tuesday, september the 16th, and this is Markets with Megan.
- 0:08Megan Horneman: If you like this podcast, please subscribe.
- 0:11Megan Horneman: You can hit that alarm bell or share with friends, family or colleagues.
- 0:15Megan Horneman: But we're here today to break down the economic data we got this morning and it was on the August reading for retail sales.
- 0:20Megan Horneman: Surprisingly, with the weakness we've seen in consumer confidence and all of the struggles with inflation, consumers continue to spend and you've seen that in the headline retail sales number, which rose six-tenths of a percent compared to the expectation of only two-tenths of a percent.
- 0:36Megan Horneman: The control group, which is what we like to look at, which excludes a lot of those volatile items like food, energy, building materials this rose seven-tenths of a percent when it was only expected to rise 0.4 percent.
- 0:50Megan Horneman: So retail sales were much stronger than anticipated.
- 0:54Megan Horneman: Where this gets a little concerning for the Fed is when you look at the same data that we got the data we got for August for import prices.
- 1:04Megan Horneman: So this is where tariffs may be showing up.
- 1:06Megan Horneman: Import prices rose three-tenths of a percent.
- 1:10Megan Horneman: The expectation was for them to actually decline, and why this is concerning with retail sales is because retail sales is not an inflation-adjusted number.
- 1:20Megan Horneman: So it's very difficult for us to decipher whether or not that big beat on the retail sales number was due to consumers actually spending more because all of a sudden they're more confident about the economy or the fact that the price of the items they're buying is higher.
- 1:38Megan Horneman: We lean towards the latter because we think that this is showing us that inflation pressures are not behind us.
- 1:43Megan Horneman: That's because when you look at the categories where we saw the biggest rises for the month of August, it was in those things that are subject to tariffs, so clothing, non-store retailers, this is Internet shopping, but again, internet shopping.
- 1:59Megan Horneman: These are also some of the import-related items.
- 2:01Megan Horneman: They rose 2% on a month-over-month basis.
- 2:04Megan Horneman: When you look over the past year, you're looking at internet sales rising 8.2% on a year-over-year basis.
- 2:11Megan Horneman: You're looking at clothing, up almost 8% on a year-over-year basis.
- 2:16Megan Horneman: So these are things that may be subject to the tariffs which might be impacting that headline retail sales number.
- 2:22Megan Horneman: So it's again going to be confusing for the Fed when they're meeting today and they'll deliver their results of the meeting tomorrow.
- 2:29Megan Horneman: We still think they'll come in tomorrow, on Wednesday the 18th, with a rate cut.
- 2:33Megan Horneman: We don't think it's going to be 50 basis points, probably 25.
- 2:37Megan Horneman: And we really hope that they address the concern that they have about inflation and that it is still a very volatile piece of economic data that they can't really forecast at this time and that will keep them going meeting to meeting to consider what the future pace and magnitude of rate cuts will be.
- 2:55Megan Horneman: That's all we have today.
- 2:57Megan Horneman: Again, we'll be back tomorrow with some more economic data and that much anticipated Fed meeting.
- 3:02Megan Horneman: Thank you.
- 3:02Megan Horneman: If you want a history of our podcast, you can go to marketswithmegan.
- 3:04Megan Horneman: fm.