Friday, December 15, 2017

Real retail sales for November 2017 portend positivity for 2018

 - by New Deal democrat

There have been any number of perfectly good and perfectly obvious write-ups of yesterday's retail sales report for November.

I like to think much of  my "value-added" is telling you not about what the data indicates about now, or about the recent past, but what it portends in the near and further-term future, and real retail sales is one of my favorite metrics for thet.

So, here are two 2018 takeaways from real retail sales:

1. Real retail sales per capita adds to the evidence that, left to its own devices, the economy will not enter a recession in 2018.

This number has frequently turned one year or more before recessions, including the last two. The 0.8% retail sales vs. 0.4% inflation, with ~0.06% population growth means it made another new high yesterday:

2. The job market measured YoY should remain steady over the next 3 - 6 months.

This is a relationship I started graphing in the middle of the "Great Recession" in early 2009. Divide real retail sales by 2, and the smoothed trend gives you a good idea where YoY payroll growth is going to trend in the near future:

With the exception of the outsized moves in retail sales just after the recession, the correlation is pretty good, and the directional trend is a close match.  

Bottom line: the recent improvement in retail sales, including the big numbers from October and November, at very least suggest that the employment situation will not soften significantly in the next few months.

P.S.: I'd be inclined to treat the jump in the past several months as a hurricane-related rebound, but no such jump occurred after either Katrina in 2005 or Sandy in 2012.