Written by Steven Hansen
Advance Retail Sales were good in May 2012.
- The US Census and Econintersect disagree on what is a good month – they think this data is worse than last month, and Econintersect sees it better.
- Gasoline sales are becoming a major headwind to the year-over-year growth
- Auto sales and non-store retailers (e.g. Amazon) are the tailwinds for year-over-year retail sales growth
- sales down 0.2% month-over-month, up 5.3% year-over-year
- the market was expecting -0.2% to -0.3% sales growth month-over-month (versus the -0.2% reported)
- sales up 3.4% month-over-month more than reversing last months decline, and up 7.1% year-over-year
- sales (inflation adjusted) up 4.8% month-over-month, up 4.8% year-over-year
Inflation adjusted retail sales have mostly remained in a channel between 2% and 6% year-over-year increases since the end of 2010. There is no obvious up or down trend.
From the U.S. Census Bureau press release:
The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for May, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $404.6 billion, a decrease of 0.2 percent (±0.5%)* from the previous month, but 5.3 percent (±0.7%) above May 2011. Total sales for the March through May 2012 period were up 5.7 percent (±0.5%) from the same period a year ago. The March to April 2012 percent change was revised from 0.1 percent (±0.5)* to -0.2 percent (±0.2%)*. Retail trade sales were down 0.2 percent (±0.5%)* from April 2012, but 5.0 percent (±0.7%) above last year. Nonstore retailers sales were up 12.4 percent (±3.1%) from May 2011 and motor vehicles and parts dealers were up 10.0 percent (±2.1%) from last year.
The differences between the headlines and Econintersect are due to different approaches to seasonal adjustment (see caveats at the end of this post).
May 2012 was again a record month (current dollars), with the last 12 months having record current dollar sales.
Caveats On Advance Retail Sales
This data release is based on estimates. However, the estimates have proven to be fairly accurate although tend to miss at economic turning points. Therefore up to three months are subject to backward revisions, although normally slight, can sometimes be modest.
The data in this series is not inflation adjusted – and Econintersect adjusts using CPI less shelter CUSR0000SA0L2. As the CPI is not yet released for the current month, Econintersect uses the previous month’s value in its analysis.
The St. Louis Fed also inflation adjusts this series using the CPI. The graph below, using data through December 2011, demonstrates how well retail sales track recessions. For this reason the metric is worth tracking closely (graph updated through April 2012).
As in most US Census reports, Econintersect does not agree with the seasonal adjustment methodology used and provides an alternate analysis. The issue is that the exceptionally large recession and subsequent economic roller coaster has caused data distortions that become exaggerated when the seasonal adjustment methodology uses more than one year’s worth of data. Further, Econintersect believes there is a New Normal seasonality. Using data prior to the end of the recession for seasonal analysis could provide the wrong conclusion.
The impact of the monthly retail sales data on GDP is not straight forward. Real GDP (of which the consumer is over 60%) is adjusted for inflation. Further, GDP is an analysis of quarter-over-quarter or year-over-year growth, while retail sales is a monthly data series.
Econintersect determines the month-over-month change by subtracting the current month’s year-over-year change from the previous month’s year-over-year change. This is the best of the bad options available to determine month-over-month trends – as the preferred methodology would be to use multi-year data (but the New Normal effects and the Great Recession distort historical data).