Written by Steven Hansen
Earlier this week, Econintersect stated Retail Sales Came In Strong In July 2013. But some have reservations about the relative strength of retail sales in July.
One analyst worried how much longer car sales would lead retail sales – and predicted a huge plunge was coming. I am not worried about a real fall in car sales.
Figure 1 – Car Sales per Capita
Car sales per capita have been declining :
- some believe income is not keeping up with car prices – but this is false;
Figure 2 – Indexed Price of New Vehicles (blue line), Indexed CPI-U (red line), and Indexed Disposable Income
- car are more robust and lasting longer which is causing a long term decline in sales;
- continued urbanization trends make cars less necessary (as public transport is used instead).
Current car sales per capita are well below the “worry line” shown in Figure 1. While it is true that the rate of growth of car sales cannot continue indefinitely – it should not be a worry for at least a year if the current rate of growth continues.
Figure 3 below shows the last several months have been good for retail sales – and may be reversing the long term down trend seen since 2011.
Figure 3 – Inflation adjusted Retail Sales – Totals (blue line, left axis), year-over-year growth (red line, right axis)
If you include population AND inflation adjustment of retail sales – the general downward trend since mid 2011 is still in play – although retail sales with that adjustment did improve in July over June 2013.
Figure 4 – Year-over-Year Inflation and Population Adjusted Growth of Retail Sales
And some analysts have pointed out retail sales were below expectations. Well, there are expectations and then there are expectations. The July month-over-month gain in retail sales of 0.2% were on the high side of most expectations (analysts range of -0.1% to 0.3%). Even better, core Retail Sales (which excludes Autos) were up 0.5%, a substantial improvement over last month’s 0.1%.
Everything is relative – and retail sales were relatively strong in July.
Other Economic News this Week:
The Econintersect economic forecast for August 2013 again declined, and sees the economy barely expanding. The concern is that consumers are spending a historically high amount of their income, and several non-financial indicators are struggling or flat.
The ECRI WLI growth index value has been weakly in positive territory for over four months – but in a noticeable improvement trend. The index is indicating the economy six month from today will be slightly better than it is today.
Current ECRI WLI Growth Index
Initial unemployment claims grew from 333,000 (reported last week) to 320,000 this week. Historically, claims exceeding 400,000 per week usually occur when employment gains are less than the workforce growth, resulting in an increasing unemployment rate.
The real gauge – the 4 week moving average – improved from 335,500 (reported last week) to 332,000. Because of the noise (week-to-week movements from abnormal events AND the backward revisions to previous weeks releases), the 4-week average remains the reliable gauge.
Weekly Initial Unemployment Claims – 4 Week Average – Seasonally Adjusted – 2011 (red line), 2012 (green line), 2013 (blue line)
Bankruptcies this Week: Anchor BanCorp Wisconsin
Data released this week which contained economically intuitive components (forward looking) were:
- Rail movements growth trend is currently accelerating.
- Retail trend lines may be changing for the good.
All other data released this week either does not have enough historical correlation to the economy to be considered intuitive, or is simply a coincident indicator to the economy.