Article written by Tyler Durden
According to the GDP report released this Wednesday by the BEA, operating profits for the retail trade sector in the US hit record highs in Q2 .
As mentioned yesterday on S&S, the BEA released a revised report of US Q2 GDP at -31.4%. Despite this nightmarish number, record earnings from large domestic retailers, such as Walmart, Amazon, and Home Depot, were likely responsible for the surprising gains in retail trade.
What’s puzzling is that the record profits in retail occurred even when store bankruptcies (for example, in NYC, where 6,000 business closures have resulted in a 40% eruption in bankruptcy filings across business districts of all five boroughs this year, according to a report by Bloomberg) have been at their highest since the great financial recession.
A potential reason for this could have been the mass stockpiling prior to and during the first few months of the pandemic, which occurred during Q2.
Recessions don’t usually result in personal income soaring, which has a postitive correlation with retail trade. Though, as said by DB’s Jim Reid, “this one has thanks to government support around the world”‘. Thank you CARES !
However, if no further fiscal stimulus program is agreed upon, which is seen as increasingly likely as Mnuchin and Pelosi are far apart in Washington, these astonishing retail trade profits will crater quickly. A stimulus deal not agreed upon before the US election may have catastrophic consequences for the US economy.
Works Cited:
https://www.zerohedge.com/markets/bizarro-recession-q2-retail-trade-profits-surge-record-high
The retail profit growth seems to be driven by a few big companies, as the growth in the S&P has seen? Many small companies/businesses are struggling or closing yet these large companies are bigtime driving the numbers.