- by New Deal democrat
Consumer spending is about 70% of the economy, and retail sales is our first wide measure of that spending. For the second month in a row, this morning’s update for April was unsurprisingly dominated by what happened at gas stations.
Nominally, total retail sales rose 0.5% in April, But after taking the monthly 0.6% increase in consumer prices into account, real sales declined -0.1% (blue):
But let’s take a look at the impact of gas prices. The below graph shows total retail sales (blue), and also retail sales minus gas (gold), both nominally. As per the above, total sales rose 0.5%. But sales ex-gas only rose 0.3%:
Now let’s look at real sales ex-gasoline. The below graph shows real sales ex-gasoline, deflated two ways; first, by the headline CPI number (blue); and second, by CPI excluding energy (gold):
Deflated by headline CPI, retail sales excluding gasoline declined -0.4% in April, and remain below their peak last August. Deflated by CPI less energy, they declined -0.1% from their peak in March. And although I won’t show the graph this month, it is interesting that the same phenomenon occurred in the 20006-07 period before the Great Recession, where total real retail sales trended slightly higher, but excluding gasoline trended lower.
On a YoY basis, nominal total retail sales were up 4.9%, but in real terms were only up 1.1%:
Excluding gasoline, nominal sales YoY were up 3.7%, and in real terms *down* -0.1% using headline CPI, and up 0.8% using CPI excluding energy:
In the March personal income and spending report, we saw that consumes handled the first month of gas prices increases by essentially just putting the extra spending on their credit cards. While it is certainly within the range of noise, the retail sales report for April suggests that consumers have transitioned to a “wait and see” pattern, withholding additional purchases until they see what happens next with gas prices.
Finally, since consumption leads employment, here is the update of YoY total real sales (/2 for scale) together with employment (red):
This suggests that on a YoY basis the stabilization we have seen in the last two jobs reports is likely to continue in the next several months. Which means it is not likely to be recessionary, but more likely to be in “wait and see” mode as well.
