March Retail Sales: A Slight Decline in Real Terms

Editor’s note:  This is one of two articles posted today on GEI Analysis addressing retail sales data.  This article is an analysis of how current retail sales fit in a longer historical perspective focussed on the rate of recovery of retail sales from the Great Recession.  The other article, by Steven Hansen, focuses on the rate of recovery of retail sales from the Great Recession.  

The April 2011 Advance Monthly Sales for Retail Trade and Food Services Report for March was released this morning. Here is the summary from the report:

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for March, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $389.3 billion, an increase of 0.4 percent (±0.5%)* from the previous month, and 7.1 percent (±0.7%) above March 2010. Total sales for the January through March 2011 period were up 8.1 percent (±0.5%) from the same period a year ago. The January to February 2011 percent change was revised from +1.0 percent (±0.5%) to +1.1 percent (±0.2%).Retail trade sales were up 0.3 percent (±0.5%)* from February 2011, and 7.3 percent (±0.7%) above last year. Gasoline stations sales were up 16.7 percent (±1.7%) from March 2010 and nonstore retailers sales were up 12.4 percent (±3.1%) from last year.* The 90 percent confidence interval includes zero. The Census Bureau does not have sufficient statistical evidence to conclude that the actual change is different than zero.

The 0.4% number is slightly below the consensus estimate of 0.5% and’s own more optimistic 0.6% forecast.

The chart below shows the complete data series from 1992, when the U.S. Census Bureau began tracking the data. I’ve highlighted recessions and the approximate range of two major economic episodes that have impacted consumer attitudes. The Tech Crash that began in the spring of 2000 had little impact on consumption. The Financial Crisis of 2008 has had a major impact. The latest retail sales take us in nominal terms 2.5% above the previous high of November 2007.

Here is the same chart with two trendlines added. These are linear regressions computed with the Excel Growth function.

The green trendline is a regression through the entire data series. The latest sales figure is 6.7% below the green line end point.

The blue line is a regression through the end of 2007 and extrapolated to the present. Thus, the blue line excludes the impact of the Financial Crisis. The latest sales figure is 15.1% below the blue line end point.

We normally evaluate monthly data on a month-over-month or year-over-year basis. The March 0.4% increase over February and 6.7% increase over March 2010 are in the right direction. But a snapshot of the larger historical context illustrates the devastating impact of the Financial Crisis on the U.S. economy.

The “Real” Retail Story: We’re Still in a Recession Consumer Economy

The chart below is the one that tells us the most about the U.S. retail economy and the long-term behavior of the consumer. The sales numbers are adjusted for population growth and inflation. For the population data I’ve used the Bureau of Economic Analysis mid-month series available from the St. Louis FRED (here). Inflation is based on the CPI with a linear extrapolation for March (in advance of Friday’s CPI release). March retail sales adjusted accordingly declined a fractional -0.2% from February.

Consider: During the past 21 years, the U.S. population has grown by over 22% while the dollar has lost about 38% of its purchasing power to inflation. When we adjust accordingly, the rebound in retail sales from the bottom in April 2009 merely gets us back to the per capita spending during the late 1999.

Retail sales have been recovering since the trough in 2009. But the “real” consumer economy, adjusted for population growth still in recession territory — 7.7% below its all-time high in January 2006.

Note: For the mathematically inclined, I’ve included a linear regression and a best-fit polynomial regression. The inflation-adjusted series is chained to the January 1992 dollar when this series began being reported.

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