Tuesday, December 14, 2010

Retail Sales Are On Fire

From Bloomberg:

Retail sales for November came in much stronger than expected, but a big question is how much of it is due to inflation. Overall retail sales in November posted a healthy 0.8 percent gain, following an upwardly revised 1.7 percent boost in October. The latest number topped the median market forecast for a 0.6 percent increase. Excluding autos, sales were even more robust with a 1.2 percent rise, following a 0.8 percent jump in October and coming in above analysts' forecast for a 0.7 percent increase. Sales excluding autos and gasoline rose 0.8 percent, matching October's advance.

For the latest month, overall sales were led by a 4.0 percent spike in gasoline station sales which likely was price related. Also likely suffering upward price pressure was a 0.8 percent rise in food & beverage store sales. Nonetheless, many other components were notably strong, including sporting goods & hobby, up 2.3 percent; clothing, up 2.7 percent; and general merchandise, up 1.3 percent.

A standout weakness was in electronics & appliance stores, down 0.6 percent, and likely weak from discounting.

Overall retail sales on a year-ago basis in October slipped to 7.7 percent from 8.0 percent the prior month before. Excluding motor vehicles, sales came in at up 6.7 percent, improved from 6.6 percent in September.

These are very strong numbers and are very encouraging. In addition, consider the following chart from the same story:

Retail sales have printed very strong numbers for the last four months -- they are more or less on fire.

Regarding the inflation points made in the article: food service sales comprise 13.21% of the total number, while gas sales comprise 9.53%. So, assuming the worst -- that the gains we are seeing are inflation and not real sales gains -- only about 25% of the sales total are severely impacted by the inflation numbers.

In addition, here is the latest inflation information from the BLS:

Over the last 12 months, the index for all items less food and energy has risen 0.6 percent, the smallest 12-month increase in the history of the index, which dates to 1957. The energy index has risen 5.9 percent over that span with the gasoline index up 9.5 percent. The food index has risen 1.4 percent, with both the food at home index and food away from home index rising the same 1.4 percent.

While a case can be made for gasoline inflation being an issue, the food index does not appear to be running at very high levels over the last 12 months.