Strong Retail Sales Do Not Point to Real Economic Growth

Editor’s note:  Two contributors have reviewed the advance retail sales data for January with two completely unrelated approaches.  They have come to similar conclusions for very different reasons.  Steven Hansen’s analysis is in this article and Doug Short’s is here.

Advanced retail sales for January 2010 remained strong.

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for January, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $381.6 billion, an increase of 0.3 percent (±0.5%)* from the previous month, and 7.8 percent (±0.7%) above January 2010. Total sales for the November 2010 through January 2011 period were up 7.6 percent (±0.5%) from the same period a year ago. The November to December 2010 percent change was revised from +0.6 percent (±0.5%) to +0.5 percent (±0.3%).

Retail trade sales were up 0.5 percent (±0.5%)* from December 2010, and 8.3 percent (±0.7%) above last year. Auto and other motor vehicle dealers sales were up 16.7 percent (±2.3%) from January 2010 and nonstore retailers sales were up 13.5 percent (±3.1%) from last year.

These numbers are extrapolated by survey – however, revisions to the survey numbers historically are not large.  Econintersect believes only the unadjusted data – which is not distorted by the Great Recession data, can be used to evaluate retail sales.  The unadjusted data graph says retail sales levels are the highest January in history.

This is the second record breaking month in a row – and they have been strong since September 2010.  The increase in January 2011 is not as dramatic as December 2010.  Has the consumer returned?

Yes and no.  Over 1/3 of the YoY increase is in autos – which is no big employer of USA nationals.  Unfortunately, much of the rest of the increase may be inflation with gas and food accounting for 30% of the YoY increase.  We will understand later this week with the release of the CPI what effect price increases have occurred in food and energy YoY.

The the sales figures do not count units sold – only count the money which exchanges hands.

Related Articles:

Wholesale Sector Continues Record Breaking Sales by Steven Hansen

A Significant Reason Retail Sales do not Indicate Recovery  by Doug Short