Is the Big US Retail Sales Number Temporary?

Wells Fargo wonders about the surge’s staying power, citing Walmart’s blah coming-year guidance.


How encouraged should we be about retail sales, given the big jump they enjoyed in January? Don’t be too hasty. There’s some contrary evidence from Walmart, the nation’s largest retail chain.

On the plus side, Wells Fargo pointed out in a research report, January US retail sales climbed 5.3% versus December—far ahead of the consensus estimate of 1.2%—with gains across all store types, notably restaurants (7%, with take-out in the lead) and electronics (up 15%).

That, wrote Christopher Harvey, Wells Fargo’s head of equity strategy and his team, “represented the biggest one-month surge in outlays since the start of the summer spending spree in June. Note to self: Don’t bet against the US consumer.”

On the other hand, Wells Fargo observed, the enthusiasm from January’s retail results must be tempered. Walmart, whose just-completed fiscal year sales were $559 billion (bigger than all but 21 countries’ gross domestic product, or GDP), had a weak outlook for the coming fiscal year, which ends January 2022.

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Excluding planned divestitures, such as the sale of its Japan business, the company expects its upcoming year’s sales to rise only by low-single digits, and earnings per share (EPS) could be flat to up slightly, Walmart said in its guidance for analysts. Wage pressure, automation costs, and tough pandemic-driven comparable sales—Wells said, “customers are no longer buying 45 rolls of toilet paper on every trip to Sam’s Club”—all are obstacles to more robust EPS growth. The chain, for instance, announced last week it was raising pay for all its 425,000 store employees.

Economy-wide, unemployment still is high, at 6.2%. Some projections call for a fast GDP recovery. Others are more cautious.

Overall in January, the US sales surge in sales is concentrated in big-ticket items, especially furniture (a 12% increase) and electronics (14.7%). To Pantheon Macroeconomics, that suggests that “some of the latest round of one-time stimulus payments found its way to retailers quite quickly.”

The question is whether the federal relief money indicates a one-time spurt. President Joe Biden hopes to enact a third round of federal aid, but that depends on Congress, where Republicans are skeptical of the effort.

Last month’s retail boost compared with December’s weakness—when the surge in COVID-19 cases and the accompanying tightening of restrictions hit spending—is striking. January’s figures mark a turnaround from three straight months of decline.

Pantheon expects a dip in February sales, owing to severe weather in much of the country, Texas being the prime example. But March should see the start of a sustained recovery, provided the recent downward track in virus cases continues, wrote Ian Shepherdson, the firm’s chief economist, in a research note.

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Multiemployer Pensions Reach Highest Funding Levels in 13 Years

Robust asset gains in 2020 raised funded ratios to pre-global financial crisis levels.


Robust investment returns helped boost the aggregate funded percentage of all US multiemployer pension plans to 88% at the end of 2020, from 85% a year earlier—the highest since before the global financial crisis at the end of 2007—according to consulting and actuarial firm Milliman.  

The strong performance came despite a turbulent year of market volatility due to the impact of the COVID-19 pandemic. The volatility caused those same plans’ funded ratio to plunge to 72% during the first quarter of the year, which was the largest quarterly drop in funded percentage since 2007. That was followed by a rebound to 82% in the second quarter, which was the largest quarterly increase in funded percentage since 2007.

However, Milliman said it is important to note that the funded levels reflect the impact of COVID-19 on investment returns only. The underlying data for Milliman’s Multiemployer Pension Funding Study is based mainly on 2018 and 2019 plan year Form 5500 information, and therefore does not yet reflect the impact of the pandemic on plan participation and contribution levels.

“Some industries, such as entertainment and travel, have been decimated by shutdowns as a result of the pandemic, and this will likely have a cascading effect on the funding of plans in those sectors,” Nina Lantz, a principal at Milliman and co-author of the study, said in a statement. “The full picture of COVID-19’s impact on multiemployer pensions will become clearer as we learn how plan participation and contributions have changed over the past year.”

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According to Milliman’s study, nearly half of all plans are at or above 100% funded, and another 30% of plans are between 80% and 100% funded, which means almost 80% of all plans have a funded level of 80% or higher. Approximately 10% of the plans have funded levels below 60% and may be headed toward insolvency.

Despite the overall rise in funded levels, Milliman said the plans that are deemed in critical and declining status continue to be mired in financial difficulty and remain on a diverging path from better funded plans. Although most plans have now recovered from the 2008 global financial crisis, the aggregate funded percentage of plans in critical and declining status is now less than half of what it was in 2007.

Milliman also cautioned that there are several factors that could significantly impact multiemployer pension plans:

  • COVID-19: The long-term effects of the pandemic are still uncertain, but it could have a long-lasting effect on plan funding.

  • The looming 2026 insolvency of the Pension Benefit Guaranty Corporation (PBGC): Without congressional intervention, program insolvency would cut guaranteed benefits to levels that could be paid for only by premium income, a reduction of about 85% to 90%.

  • Funding relief legislation: Bills have recently been introduced in the US House and Senate to address challenges facing the multiemployer pension system.

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