- by New Deal democrat
So much of the changes to the economy has been dictated by the whims of the White House that it has not made much sense to throughly update the suite of long leading indicators in many months. After all, why chart their incipient effects when they are consistently being overtaken by new lurches in diktats?
With a few empty days of new economic data this week, I thought I would take a look at a few of them; in particular, those most closely tied to the “real” vs. financial, economy. Today, let’s revisit and update real sales per capita.
Real retail sales per capita have long been an element of my list of long leading indicators, because they typically turn down about a year before the actual onset of recessions. In the past several years I have added the very similar indicator of real consumption expenditiures on goods from the personal income and spending report. Like the less broad retail sales measure, their growth either turns down or at least stalls out many months before the onset of most recessions.
Since the data on both these metrics goes back many decades, I have split the data by historical sections. First I look at it in absolute terms, and then we’ll look at it YoY, which better shows the turndowns.
First, here are real retail sales per capita have (red) and real spending on goods per capita (blue) from 1959-82, 1983-2008, and 2009-present:
While both metrics are somewhat noisy month over month, it is obvious that both measures of consumer spending increase almost continually throughout expansions, but either turn down (real retail sales) or at least stall (real spending on goods) typically on the order of a year before the onset of recessions in the past 60+ years. There have only been two exceptions: 1966 for real retail sales, and 2022-23 for both metrics.
Why did the indicators fail in 2022-23? Mainly as an artifact of comparison. The stimulus payments to consumers in 2020 and 2021 during the pandemic led to a lot of durable goods purchases in particular, often goods delivered to homes. Simply put, for some time consumer demand for goods, especially durable goods, was largely satiated. Secondarily, the big decline in the price of gas from $5 to $3 a gallon beginning in July 2022 freed up lots of consumer cash to be spent elsewhere, thus avoiding a consumer-centric economic downturn.
Note that in the past year both metrics have essentially stalled. And insttead of a big decline in gas prices, consumers have been faced over the past six weeks with a big incrrease.
Now let’s look at the same historical series YoY:
Again, note how positive YoY improvements in real consumer retail spending, and spending on goods, have always correlated with continued economic expansions. With the exception of 1966, the only negative comparisons which did not correspond with the start of or oncoming recessions were sporadic months in 1987, 1994, 1996, and the near “double-dip” of 2002-03.
Now let’s look at the post-pandemic YoY record:
Again, we see the poor 2022-23 performance, which was a major false negative resulting in large part from poor comparisons compared to 2021. While the poor performance of real retail sales continued into 2024, it was not confirmed by the broader measure of real spending on goods. Both decelerated sharply in 2025, and both were negative during December. Which means they aren’t signaling an oncoming recession now, but the trend is not good. And the YoY comparisons will be challenging for the next several months: for retail sales, February was already -0.5% below last March, and -0.2% below last April.
Real retail sales will be updated for March tomorrow, and real spending on goods will be updated on the 30th.
