Retail Sales for February show signs of life

Retail Sales, seasonally adjusted, were down by 0.11% in February compared to January.  However, they are up 1.71% from the lows reached in December 2008.  Year over year, Retail Sales are down 8.04% compared to a year ago.  This is an improvement from being down 10.58% in December 2008. 

Excluding auto sales, retail sales increased in February by 0.75% compared to January.  Year over year, retail sales are down 4.25% compared to being down 6.98% in December 2008.

Retail Sales are still at historical lows in terms of year over year growth, but the last two months have bounced off the lows reached in December.

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Retail Sales Down by 9.3%

The U.S. Census Bureau released the Retail Sales figures for January 2009 today. Adjusted for inflation and for seasonal variation, Retail Sales were up in January compared to December 2008 by 1.0% and down by 9.3% compared to a year ago. Economists were expecting a 0.8% drop compared to December.  A large part of the gain in January from the previous month was due to downward revisions of previously reported figures.  Retail Sales for December were revised downward this month by 0.6%. 

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Retail Sales Post Depressing Drop

The American consumer is in a state of depression. I am not just talking about their mood after opening their quarterly brokerage account. The U.S. Census Bureau released the Retail Sales figures for December 2008 today. Adjusted for inflation, Retail Sales plunged in December by 2.7% compared to November and by 10.2% compared to a year ago. Economists were expecting a 1.2% drop compared to November. This is the largest annual drop since July 1951 (which was an aberration due to a very high increase in July 1950). While the NBER has declared the American economy to be in a state of recession, we are a long way off towards being a depression. Some economists define a depression as real GDP declining by 10% over a year. Retail Sales, however, have now entered into depression levels.

This current decline in Retail Sales is a result of a change in dynamics. For years, America has maintained a trade deficit, importing more goods than exports. This deficit has been funded by increases in personal income. The net result has been a positive increase in lifestyle that was sustainable. After the 2001 recession the dynamics changed. The trade deficit took off while personal income was slow in recovering. Consumer spending was no longer sustainable.

Consumer spending was being supported by changes in household net worth. The Federal Reserve publishes a plethora of information including the Balance Sheet of Households and Nonprofit Organizations in their quarterly Flow of Funds Report. From 1970 to 1994, U.S. Households averaged a gain of $2.0 trillion (in 2008 dollars) in household net worth each year. From 1995 to 1999 that increased to an average of $4.6 trillion in gains a year. During 2000 to 2002, net worth dropped by an average of $609 billion a year. But from 2003 to 2006, stock prices recovered and the housing boom took off. Household net worth went up an average of $5.9 trillion a year. Consumers, propped up with enormous paper gains continued spending even though it wasn't supported by gains in personal income.

In 2007, the financial crisis erupted. From the fourth quarter in 2007 to the third quarter of 2008, the net worth of U.S. households declined by a horrific $7.15 trillion. The S&P 500 declined by 22.5% in the fourth quarter. Housing also started declining faster last quarter. When the Fed reports the latest Flow of Funds report in March, the total loss in net worth through the fourth quarter will likely be over $10 trillion. Obama's $800 billion stimulus and the remaining $350 billion in TARP money pale in comparison to the losses sustained. Fears of rising unemployment are also affecting the consumer. We have entered into a new era; U.S. consumer spending will continue to face pressure to come down to a sustainable level.

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Retail sales plunge in October; retail employers are cutting back

The U.S. Census Bureau announced on Friday that retail and food services sales for October 2008 with seasonal adjustments was down 2.77% from September and down 3.48% compared to a year ago. Economists had expected a decline of 2.1%. Retail sales without including autos (excluding autos makes the data less volatile) was down 2.20% compared to the previous month and up 1.38% compared to the previous year. Retail sales adjusted for inflation declined by 7.69% in October compared to the previous year. This is the worst annual decline since June 1980.

This graph on the right looks at retail employment versus regular employment year over year change. From 1968 - 1987, retail employment was stronger than regular employment. From 1987 retail employment has declined more at the lows and has had drops where regular employment was flatter. Currently more jobs are being lost on the retail side than in the general economy. The retail sector seems to be bracing for a rough recession.

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Retail Sales down sharply in September

The U.S. Census Bureau announced today that retail and food services sales for September 2008 with seasonal adjustments was down 1.16% from August and down 1.03% compared to a year ago. This was almost double the decline that economists were expecting of -0.7%.  Retail sales without including autos (excluding autos makes the data less volatile) was down 0.60% compared to the previous month and up 3.61% compared to the previous year.

Retail sales adjusted for inflation declined by 6.23% in September compared to the previous year.  This is the worst annual decline since January 1991.  Retail sales was holding up fairly well in spite of the financial crisis.  Retail sales adjusted for inflation didn't turn negative until August 2008.  Even then it was negative by a tame 0.18%.  However, we are now clearly in a recessionary state.  This data also came before the massive declines in the stock market this month.  The negative wealth effect will put extra pressure on future retail sales numbers.

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Retail Sales decline by 0.12% last month

The U.S. Census Bureau announced today that retail and food services sales for July 2008 with seasonal adjustments was down 0.12% from June and up 2.63% compared to a year ago. Retail sales without including autos (excluding autos makes the data less volatile) was up 0.38% compared to the previous month and up 5.84% compared to the previous year.

Retail sales adjusted for inflation declined by 3.27% in July compared to the previous year.  The decline in Retail Sales over the last 6 months has been the worst 6 month span since 1992.  The the decline in retail sales is causing havoc for many retailers as is reflected in the amount of retailers and restaurants going bankrupt recently.

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Retail sales for May came in strong

The U.S. Census Bureau announced today that retail and food services sales for May 2008 with seasonal adjustments was up 1.02% over April and up 2.40% compared to a year ago. Retail sales without including autos (excluding autos makes the data less volatile) was up 1.18% compared to the previous month and up 4.61% compared to the previous year.

The month over month numbers were strong. Economists had expected an increase of only 0.7% excluding auto sales. Interestingly the year over year the growth rate actually declined as the increase in May 2007 over April 2007 was even stronger than the increase this year. When including autos and adjusting the numbers for inflation, retail sales declined by 1.2% in May compared to the previous year.

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Retail Sales for April was stronger than expected

The U.S. Census Bureau announced today that U.S. retail and food services sales figures for April 2008. Seasonally adjusted, retail sales were down 0.19% from last month (economists had expected a 0.3% drop) and were up 2.0% from a year prior. Adjusted for inflation, retail sales were down 1.47% from a year ago.
Taking out auto sales, retail sales were up 0.45% from last month (economists had expected a 0.1% gain) and up 4.49% from a year prior. Adjusted for inflation, retail sales excluding autos were up 0.90% from the previous year. Year over Year, retail sales would have been 0.7% less if not for new seasonal adjustments that were made back to January 2002.

Compared to a year ago, the biggest gainers are gasoline stations which is up 16.3% and Grocery Stores, up 6.1%. Auto sales has shown the biggest decline at 8.0%.

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Retail Sales Post Small Gain in March

The U.S. Census Bureau announced the advance estimates for U.S. retail and food service sales for March 2008. Seasonally adjusted, sales were $381.4 billion, an increase of 0.15% over February 2008 and 1.97% over March 2007. Retail sales were led by Gasoline station sales which were up 1.09% from the previous month and 18.94% from a year ago fueled by the large increases in oil prices. Adjusted for inflation, sales were down 0.08% from the previous month and down 1.31% from the previous year.

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Retail Sales fall in February

The U.S. Census Bureau announced the Retail Sales numbers for February 2008 today. Seasonally adjusted, February was down 0.6% from January 2008 but was up 2.6% from February 2007. Gasoline station sales were up 20.2% from February 2007 caused by the rise in gas prices.

Adjusted for Inflation, retail sales are now down year over year for the 3rd month in a row. It is rare for retail sales to decline without being in a recession. This is especially the case if you factor out one month declines which are often sandwiched between strong months. Retail Sales sustained declines outside of recession periods in 1951 and 1967. Auto sales are volatile and often create large short term swings.

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January Retail Sales come in stronger than expected

The U.S. Census Bureau announced January 2008 Retail and Food Service Sales figures today. Adjusted for seasonal variation and holiday and trading-day differences, January 2008 had an increase of 0.33% from the previous December 2007 and a 4.27% above January 2007. Economists had expected a 0.3% decrease.

This is the advance release. The figures are often heavily revised in the next two months. The sales numbers have been revised downward in recent months. If December 2007’s Retail Sales figures had not been revised down this month, then January 2008 would have decreased 0.01% instead of the strong 0.33% gain. November Retail Sales when initially released looked really strong, posting a 1.2% increase over October 2007. November 2007 has been revised 0.62% below the initial released figures.

Retail Sales were led by Gasoline station sales which were up 23.0% from January 2007 due to increases in gas prices.

Here are two charts on Retail Sales. The second chart is without Automobiles which is more volatile. You can click on the charts for a larger view.

Here is a link to last month's post on December 2007 Retail Sales results.

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Retail Sales fall after a strong November

Retail sales for December 2007 were down by 0.37% from November 2007 and up 4.24% from December 2006. Economists had expected retail sales to remain unchanged for the month of December.

There were downward revisions to October 2007 and November 2007 as well. October 2007 compared to September 2007 was revised from to a gain of 0.23% to a gain of 0.03%. November 2007 compared to October 2007 was revised from to a gain of 1.22% to a gain of 1.06%.

November 2007 Retail Sales numbers were very strong. It was one of the last indicators suggesting that we would not enter a recession. The market is reacting negatively to the December 2007 Retail Sales numbers. It isn’t necessarily because the numbers themselves are super weak, but more because the last hope for the economy, the U.S. consumer, seems to be faltering a bit.

Taking a look at the lagging components from December 2007 to November 2007 is also troublesome: Electronics and appliance stores, down 1.9%; Building material and garden equipment & supplies dealers, down 2.9%; Clothing, down 2.0%; Sporting goods, hobby, book and music stores, down 2.0%. Food & beverage stores were up 0.7%, and Food services & drinking places were up 0.2%. The items that were down were more discretionary in nature than the items that were strong. Also, these figures are not adjusted by inflation, so the rises in food prices may be also due to inflationary pressures.

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The mighty U.S. consumer puts the economy on their back

Per the Wall Street Journal:

U.S. retail sales surged in November, making a surprisingly strong, broad-based climb that suggests the economy might not be as weak as feared.
…
Retail sales increased by 1.2%, the Commerce Department said Thursday, compared with an unrevised 0.2% in October.

The median estimate of 10 economists surveyed by Dow Jones Newswires was a 0.6% advance in November. Analysts have been expecting consumer spending -- and the economy as a whole -- to slow sharply in the final months of 2007 compared with the third quarter amid falling home prices and rising energy costs.

Sudeep Reddy blogs at the WSJ:

· Retail sales figures pushed Morgan Stanley’s fourth-quarter GDP estimate to 1% from 0.2%, and then the increase in business inventories pushed the tracking figure to 1.2%.
· Lehman Brothers raised its growth estimate to “close to” 1% vs. the previous 0.1%. “This dramatically reduces the odds of a negative print during the quarter and suggests that second half growth could average as high as 3%,” its economists said.
· J.P. Morgan economists boosted their growth estimate to 1.5% from 0.5% previously due to surprises in retail sales, government military spending and inventory growth figures. At the same time, however, they lowered their forecast for the first quarter of 2008 to 1% from 1.5% as the stronger demand in the current quarter “is viewed as borrowing from the start of next year.”

Here are 2 Retail Sales charts with and without auto sales. Taking out auto sales removes some of the volatility especially month over month (red bars). Click on the chart to make it bigger.

Background on Retail Sales

The advance report is published by the U.S. Census Bureau around the 11th to 15th of each month for the previous month's numbers. The December advance numbers are scheduled to be announced on January 15, 2008. At that time they will announce the “preliminary” November numbers and the “revised” October figures. There is also a revision released annually every spring.

The sales report measures sales at retail stores. The report is often viewed excluding motor vehicles. Attention is also paid to the gas and food components where changes can be more of product of changes in prices than changes in demand.

Sales makes up about half of personal spending which in turn makes up about two thirds of US GDP . Total personal spending (including services) will be announced in the the personal income and spending reports on December 21, 2007.

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