QI TAKEAWAY —  Winners and losers in the retail space should be ranked by stagflation risk. The biggest headwinds are coming from Auto & Home-Related Goods. Tailwinds are in place for Staples and Restaurants.
  1. Auto and Home-Related Goods sales fell 4.2% MoM in May, while Retail Staples and Food & Drink rose 1.1% and 1.8% MoM, respectively; the decline in Auto and Home-Related Goods was so pronounced that it accounted for 97% of last month’s headline sales decline
  2. May’s headline and core Producer Price Index prints beat expectations for the third straight month; the aggregate PPI for retail trade industries saw a record 7.7% YoY rise, piercing 5% three times so far this year after having never done so in pre-pandemic data back to 2007
  3. Yesterday’s announcement that the Fed will conduct two small MBS sales next week is the most significant since the start of the pandemic; the decision to test market reaction to an MBS taper suggests that the nation’s central bank is sufficiently concerned about stagflation