US spending comes in stronger, but challenges remain | Metals Mine

  • US spending comes in stronger, but challenges remain

    From think.ing.com

    US retail sales were firmer than predicted for August, rising 0.6% month-on-month at the headline level, while ex autos gained 0.7% MoM relative to 0.2% and 0.4% consensus forecasts respectively. The control group, which excludes volatile components such as autos, gasoline, food service and building materials, better tracks broader consumer spending trends and that rose 0.7% versus 0.4% predictions. In terms of components, non-store, so largely the internet, posted a 2% MoM increase, with clothing up 1% and "eating/drinking out of home" gaining 0.7%. Furniture, health, general merchandise and miscellaneous all saw ... (full story)

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ntrpy
Sep 16, 2025 2:40pm
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Why did the dollar rally fade so after after this hotter-than-expected print?

Soft data (UoM survey) was the true signal:
- Surge in e-commerce likely a sign of consumer fragility, not strength, being enabled by credit facilities.
- Deepens bearish USD thesis and suggests market's initial bullish reaction to data was misinterpretation.

1. In-store Retail vs. Nonstore Retail (e-commerce)
- Census Bureau doesn't report single "in-store" aggregate, but can deduce by looking at components:
• Total Retail Trade Sales: +0.6%
• Nonstore Retailers (e-commerce): +2.0%
- If total +0.6% and huge component is growing at +2.0%, it means that, on weighted average basis, the rest of the sector, physical stores - must have been significantly weaker.
- Looking @ key physical store categories from the report:
• Motor Vehicle & Parts Dealers: +0.5% (slightly weaker than the total)
• General Merchandise Stores: -0.1% (negative)
• Furniture Stores: -0.3% (negative)
• Building Materials: +0.1% (effectively flat)
- Physical retail space, representing bulk of trad consumer activity, was effectively flat-to-negative.
- Entire headline beat was driven almost exclusively by surge in e-commerce.

2. BNPL hypothesis: Debt-fuelled consumption
My hypothesis is this divergence is driven by low-friction credit e.g. "Buy Now, Pay Later" (BNPL)
- Scenario:
• We have consumers who are demonstrably worried.
• UoM survey showed collapse in confidence and spike in unemployment fears.
• Real wages being squeezed by inflation; equals financially stressed consumers.
- In-Store:
• To make large purchases, consumers generally needs cash, debit, or credit
• Latter becoming harder to access as banks tighten lending standards in the face of slowing economy
- Online (e-commerce):
• At the checkout, consumer is presented with a host of BNPL options (Klarna, Clearpay etc.) that allows them to break large purchases into smaller, interest-free instalments
• BNPL often have much lower credit approval thresholds than traditional credit.

3. Summary
• Cash-strapped/worried consumers, to complete essential spending (back-to-school etc), gravitate towards channels that allow them to acquire the goods now, while deferring costs.
• Massive outperformance of e-commerce is not a sign of consumer strength, but sign of consumers leveraging accessible, short-term debt to maintain standards of living.
• Growth driven by pulling forward future demand and increasing household liabilities.
• Unsustainable in S/T; BNPL will act as a direct headwind on future consumption.
• Soft data exposed as true signal (UoM survey); hard data was an illusion created by nominal price effects & BNPL.
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