Tuesday, May 14, 2013

Why yesterday's retail sales report was actually a huge positive

- by New Deal democrat

On the surface, yesterday's report on retail sales for April was just barely positive, rising 0.1% after a revised -0.5% decline in March. But the real story is how strong inflation adjusted retail sales are likely to be. In fact, they probably set a new post-recession high. You can thank the loosening of the Oil choke collar for that.

Here's a breakout chart showing total nominal sales, gasoline sales, and nominal sales ex-gasoline for the last three months:

total419.0418.6 420.5

While nominal rales have declined -0.4% since February, once we subtract gasoline sales, nominal sales have actually increased +0.6%.
But it gets better once we factor in inflation. March featured -0.2% deflation, and if my analysis is right, on Thursday we are going to find that consumer prices declined -0.4% or -0.5% in April. That means that real retail sales for April are likely to have risen +0.5% or +0.6% over March, and further that real retail sales are up +0.3% over February to a new post-recession high.

The resilience of the consumer in the face of the 2% increase in the payroll tax, as evidenced weekly by same store sales and Gallup's consumer spending poll, and now confirmed by the Census Bureau's monthly retail sales report, has to be one of the big surprises of the first half of 2013. The dark cloud within this silver lining is the strong decline in the personal savings rate. At the same time, it certainly bespeaks a real robustness in consumer confidence - at least as reflected in how consumers vote with their wallets.