Fed: Slowdown in Retail Sales Hints at Economic Frustration

• The Fed ’s emergency plan that expires in December should remain open and available as much as possible, "until we are far beyond the crisis."
• “We are committed to using all of our tools. They have some juice and we’ll deploy them as necessary,” Bostic said.
• He said he was anxious about an inconsistent recovery, but he felt it would be robust overall.

Atlanta Federal Reserve Bank President Raphael Bostic said that the slowdown in retail sales growth in October may indicate a setback for the economy due to the spread of the COVID-19 epidemic in the United States this winter. In an interview with CNBC, Bostic said that it was previously expected to be slightly weaker into the fourth quarter.

He added that this is exactly what happened.

“We are committed to using all of our tools. They have some juice and we’ll deploy them as necessary,” Bostic said.

“The retail sales number gives us a sign, but there are lots of other things that we’re going to learn between now and then and that will give us some guidance as to how we should think about our next move in terms of assets.”

“I think the economy is fine, but I do believe the recovery could be more robust than it is currently playing out to be,” he said.

“We know there are communities that are hurting. The virus has hit them extremely hard. We know small businesses have been on the edge for quite some time. We need to be thinking what ways we can act to help them get through this with minimum damage.”

“The vaccine is definitely positive news and will definitely lead to I think a pretty robust recovery once it gets into the population deep enough,” Bostic told CNBC’s Steve Liesman during a “Squawk Box” interview.

“But we really have short-term and intermediate-term concerns with the spike in the virus and what that’s going to do for business in terms of the things that they’re able to produce, in terms of consumers and their willingness to go out and buy things.”

The Fed ’s emergency plan that expires in December should remain open and available as much as possible, “until we are far beyond the crisis.”

The US retail sales growth rate in October was the lowest in six months, indicating that consumers have become more hesitant in the context of the intensification of the epidemic and the lack of new federal stimulus measures.

“Manufacturing can only hold up if households keep buying and they need income to do that,” said Joel Naroff, chief economist at Naroff Economics in Holland, Pennsylvania.

Data released by the US Department of Commerce on Tuesday showed that total sales increased by 0.3% from the previous month, and the previous month’s increase was revised downward to 1.6%.

Economists surveyed by Bloomberg estimated a median increase of 0.5%. Excluding automobiles and gasoline, sales grew 0.2%, compared to expectations for a 0.6% increase.

“It looks like consumer spending is increasingly turning into a headwind for this recovery from the worst economic downturn since the Great Depression,” said Chris Rupkey, chief economist at MUFG in New York. “Fed officials are saying they might have to do more and today’s data may turn that thinking into a reality.”