Retail and Manufacturing Rebound? | S3 E133 | 04-01-26

The latest economic data showed two relative bright spots in the economy: consumer spending and manufacturing.

In this episode of Markets with Megan, Megan Horneman breaks down stronger-than-expected February retail sales, improving March ISM manufacturing data, and why inflation pressures may still keep the Federal Reserve on hold.

Watch for insights on:
- Consumer spending trends
- Core retail sales
- Discretionary spending
- Manufacturing momentum
- Supply chain concerns
- Inflation risk
- Fed outlook

For more episodes, visit: https://marketswithmegan.fm

#MarketsWithMegan #MarketUpdate #EconomicData #RetailSales #Manufacturing #Inflation #Fed #FederalReserve #Investing #MarketCommentary

https://youtu.be/w9VEPyG9xJs

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Transcript

Bright Spots To Watch

Megan Horneman 0:00

The consumer and manufacturing are some bright spots in the economy today. It is Wednesday, April the 1st, and this is Markets with Megan. If you like this podcast, you can subscribe, hit the alarm bell, share with your friends, family, or colleagues. But we want to go through the economic data that we receive on a regular basis. What does it mean for the economy? And then what is it doing to the markets? Is are the markets reacting to this data that we're seeing? This morning we got two pretty big pieces of information. First is on the consumer, and the other is on manufacturing. Now let's dig into the consumer first. Keep in mind that this data is as of February, so it does not reflect the Iran war as of yet. But retail sales came in better than expected at all different levels. The headline had its biggest increase, as you can see from autos, gas, and building materials. They did increase quite a bit. But when you strip those out, we did have a little bit of a downgrade to the January data, excluding those items, but February rose the most in four months. This is what we can we call the control group. It strips out those volatile items like autos, gas, building materials, food. We saw broad-based gains in this core number. It was led by health care and personal care, clothing, sporting goods, and electronics. We also watch a proprietary discretionary spending model that we keep. And it looks at all of those items that we consider discretionary. Things like spending at restaurants, internet, department stores, clothing, electronics, furnitures, autos. We saw the biggest jump in this indicator on a year-over-year basis that we've seen in five months. It was up 5%. Now, like I mentioned, this is before the Iran war. And these numbers are not adjusted for inflation. So that's important to remember because some of these items like clothing, furniture, electronics, we're not sure how much of that's being impacted by the tariffs or the or um the tariff that were the tariffs that are still being paid through through February. We will not be able to get that data until we we really get some of these inflation-adjusted indicators. But what this is telling us is that consumer spending was still solid in February. So it's holding first quarter GDP together. Now, when we look at manufacturing, manufacturing had been in recession for so long, but we did see that it did rise a little bit again in March. So we are seeing this now. I'm getting data that does reflect the IRAM war. It was the best increase that we've seen since August of the best level we've seen since August of 2022. And over the past two months, this ISM manufacturing indicator has seen the biggest rise in almost a decade. Now, in this indicator, though, we are starting to see some impacts from the war because this is March's data. Delivery times, they rose to the highest since May of 2022. Prices paid. This is important because this jumped to the highest level since June of 2022. The delivery times, you know, we're taking a close look at because remember the Strait of Hormous is not just about transporting energy. It also transports things like aluminum, helium, fertilizer, fertilizer, many of these things that keep the economy going, but also especially our big components in semiconductors. So this is concerning that we may see some supply chain disruptions as we get data that fully reflect the war that we've been in. Now, what are these two indicators tell us? Again, the Fed's probably not gonna do anything anytime soon. This is something we should be concerned about with inflation, specifically in the manufacturing, but then also in retail sales are some of these numbers higher because of um higher prices. So the Fed's gonna stay put. We still are in the camp that the Fed's not gonna be able to do anything this year, that inflation is still one of the bigger risks. We're not necessarily saying that they're gonna hike rates yet, but we do think that they'll be on hold. That's all we have on the economic data today. If you want a history of our podcast, you can go to marketswithmegan.fm. Thank you.