The economy shambles along: PCE's vs. retail sales
- by New Deal democrat
Back in March I wrote that while personal consumption expenditures and retail sales spending tended to peak and trough at the same time, retail slaes are much more volatile than PCE's, with the result that, "as this graph below (subtracting YoY PCE growth from YoY real retail sales growth through 1997) shows, in a very specific and non-random way:"
"Note that early in economic expansions, YoY real retail sales growth far outstrips YoY PCE growth. As the economy wanes into contraction, YoY real retail sales grow less and ultimately contract more than YoY PCE's. You can see that by noting that retail sales minus PCE's are always negative BEFORE the economy ever tips into recession. That's 11 of 11 times. Further, in 10 of those 11 times (1957 being the noteworthy exception), the number was not just negative, but was continuing to decline for a significant period before we tipped into recession. This makes perfect sense, as retail sales generally include many far more discretionary purchases. As the economy accelerates, consumers make more discretionary purchases. As it slows, the more discretionary retail purchases are the first things cut."
In March, YoY growth in PCE's exceeded that of retail sales - i.e., consistent with an economy that was expanding and was not close to recession.
Let's update this look. Here is a graph showing YoY PCE spending (blue) vs. YoY real retail sales (red):
As you can see, the prelude to the 2008-09 recession folloeed the pattern set forth from earlier. By October, YoY spending was about equal. Here's a graph combining the two into a single line, subtracting YoY PCE spending from retail sales spending as in the first graph above:
In summary, although the relationship is just barely positive, we still don't have the negative values we've seen prior to every single recession since World War 2.
I'm on Linked In and Twitter (@captivelawyer). Silver Oz's Linked In name is @silver_oz. NDD is a fossil and may be reached by etching a picture in stone on the wall of a cave.
The Bonddad Economic History Project
At the beginning of 2012, I decided to start looking at the actual, statistical history of the US economy starting in 1950. The reason is simple: to find out what really happened. So, when you see title of a post that begins with a year such as 1957, followed by "employment" or "Fed policy: you know what it's for. You can also access the information by typing in BE for Bonddad econ and a year to find information on a particular year.
Here is a link to pages that contain links to all the posts on the years listed.