Ed Kashmarek - The Everyday Economist
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Vehicles and Non-store Sales Drag Retail Sales Lower in August

9/19/2017

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​Retail sales fell 0.2% in August from the prior month, missing the consensus forecast of a 0.1% increase, following a 0.3% increase in July that was revised down from 0.6%. Sales excluding autos and gas also missed expectations, falling 0.1% compared to expectations of a 0.3% increase. On a year-over-year basis, sales were up 3.4%, less than the 3.5% pace in July and on the low end of the recent range after peaking in January.
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The biggest monthly increase in dollar terms was a $900 million, or 2.5%, increase in gasoline sales, largely driven by a surge in gas prices and heavy demand at the end of the month in the wake of Hurricane Harvey. There was not much strength anywhere else as sales at food and drinking places and food and beverage sales came in a distant second and third, rising by $167 million, or 0.3%, and $162 million, or 0.3%, respectively. The miscellaneous category saw a nice 1.4% increase in sales, while furniture sales rose a decent 0.4%. The biggest decline in sales came from motor vehicles and parts, which plunged by $1.6 billion, or 1.6%, which was also the biggest percentage decline. This followed several months of strength after a rough start to the year for the industry. Following a jump in July, non-store sales fell by $573 million, or 1.1%. Clothing also had a weak month, as sales declined by $211 million, or 1.0%.

​Sales were higher on a year-over-year basis, led by a $4.2 billion, or 8.9%, increase in non-store sales. Gasoline sales were up by $2.3 billion, or 6.8%, and building and garden supply sales were up by $2.1 billion, or 7.4%. On the downside, sales at electronics and appliance stores were down by $264 million, or 3.2%, department store sales were down by $147 million, or 1.1%, while sales at sports and hobby stores were down by $130 million, or 1.8%. Although department store sales are still down from a year ago, the decline has slowed noticeably since the end of last year. 
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If we take out the impact of gasoline sales, which are not really an indication of stronger or weaker economic growth but rather due to changing gas prices, ex-gas retail sales were up 3.1% from a year ago in August, the least since February 2014. If we also adjust for inflation, we see that real ex-gas retail sales were up 1.2%, the least since February.

​Today’s report is further justification for no rate hike tomorrow. It will be interesting to see what the Fed says about winding down its balance sheet and when they plan to begin. 
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Retail Sales Rise Twice as Much as Expected in July

8/16/2017

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​Retail sales rose 0.6% in July from the prior month, twice as much as the consensus forecast of a 0.3% increase, following a 0.3% increase in June that was revised up from a 0.2% decline. Sales excluding autos and gas also beat expectations, rising 0.5% compared to expectations of a 0.4% increase. On a year-over-year basis, sales were up 4.2%, better than the 3.6% pace in June but still below the recent peak growth rate of 5.6% reached in January. 
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The biggest monthly increase in dollar terms was a $1.2 billion, or 1.2%, increase in motor vehicles and parts. Non-store sales followed with a $696 million, or 1.3%, increase. Building and garden supply stores took the third spot with a $359 million, or 1.2%, increase. On a percentage basis, the strongest growth was seen in the miscellaneous category, where sales rose 1.8%. The biggest decline in sales came from gasoline stations, where sales fell by $130 million, or 0.4%, as gasoline prices declined. Sales at electronics and appliance stores fell by $43 million, or 0.5%, which was the biggest percentage decline. The only other decline was a $38 million, or 0.2%, drop in clothing sales.

​Sales were higher on a year-over-year basis, led by a $5.3 billion, or 11.2%, increase in non-store sales. Vehicles and parts sales were close behind, up by $5.2 billion, or 5.5%. Building and garden supply stores sales were up by $2.3 billion, or 7.9%. On the downside, sales at sports and hobby stores were down by $282 million, or 3.8%. Department store sales were down by $238 million, or 1.8%, amid a struggle against online competition, while electronics and appliance store sales were down by $85 million, or 1.0%, from the prior year. 
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If we take out the impact of gasoline sales, which are not really an indication of stronger or weaker economic growth but rather due to changing gas prices, ex-gas retail sales were up 4.3% from a year ago in July, the most since January. If we also adjust for inflation, we see that real ex-gas retail sales were up 2.6% in July. Not only was this the best growth since June 2016, but it was strong enough to break out of the two-year-long downward trend, a welcome development for consumer spending.  

​Despite all of the weak May data, the Federal Reserve raised interest rates in June but finally took a breather in July. Today’s retail sales report, along with upward revisions in the last couple months, paints a brighter picture for consumer spending. Even so, inflation remains at bay and wage growth remains tepid. This bodes well for no rate hike in September.
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Retail Sales Unexpectedly Fall in June as Gasoline Sales Decline

7/14/2017

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​Retail sales fell 0.2% in June from the prior month, missing the consensus forecast of a 0.1% increase, following a 0.1% decrease in May that was revised up from a 0.3% decline. Sales excluding autos and gas missed expectations badly, falling 0.1% compared to expectations of a 0.4% increase. On a year-over-year basis, sales were up just 3.1%, down from the recent peak growth rate of 5.6% reached in January and the least since August. 
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The biggest monthly increase in dollar terms was a $213 million, or 0.4%, increase in general merchandise sales. Non-store sales followed with a $193 million, or 0.4% increase. Building and garden supply stores took the third spot with a $161 million, or 0.5% increase. All three of these categories did better than vehicles, which only saw a $128 million, or 0.1%, rise in sales. The biggest decline in sales came from gasoline stations, where sales fell by $484 million, or 1.3%, as gas prices dropped. The miscellaneous category saw sales fall by $338 million, or 3.1%, the largest percentage drop of any category. Food and drink sales followed with a $324 million, or 0.6%, decline. Department store sales fell by $91 million, or 0.7%, as the industry continues to be challenged by online competitors.

​Sales were higher on a year-over-year basis, led by a $4.8 billion, or 5.6%, increase in vehicle sales. Non-store sales were next with a $4.5 billion, or 9.6%, increase. Building and garden supply store sales have also been strong and were up $1.5 billion, or 5.2%, from a year ago. Only two categories were down from a year ago, led by a $528 million, or 6.9%, decline in sports and hobby stores. Department store sales were also down by $518 million, or 4.0%.
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If we take out the impact of gasoline sales, which are not really an indication of stronger or weaker economic growth but rather due to changing gas prices, ex-gas retail sales were up only 3.2% from a year ago in June, the least since August. If we also adjust for inflation, we see that real ex-gas retail sales were up just 1.6% in June, still on the lower end of the recent range, which has been trending down for two years.  

​Despite all of the weak May data, the Federal Reserve raised interest rates in June. Today’s retail sales report, along with another month of weaker than expected inflation data for June, suggests the June rate hike was probably not a wise move. If the weakness in housing data that we saw in May continued in June as well, criticism of the Fed may ramp up.
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Retail Sales Decline in May as Gasoline Station Sales Plunge

6/15/2017

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Retail sales fell 0.3% in May from the prior month, missing the consensus forecast of a 0.1% increase, following a 0.4% increase in April. Sales excluding autos and gas also missed expectations, coming in unchanged versus the 0.3% forecast. On a year-over-year basis, sales were up 3.8%, down noticeably from the recent peak growth rate of 5.6% reached in January.
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This was a very weak report as the only real strength was seen in non-store sales, which increased by $405 million, or 0.8%, and led the way on both a dollar and percent growth basis. The next biggest increase by dollar value was a $75 million, or 0.3%, increase in clothing. Food and beverage stores saw sales rise by $47 million, or 0.1%. Furniture sales rose by $35 million, or 0.4%, which was the second best percentage increase. In all, only six of sixteen categories saw higher sales compared to April. The biggest decline on a dollar basis was seen in gasoline station sales, which plunged by $923 million, or 2.4%, as both prices and gallons purchased dropped. Electronics and appliances sales fell by $237 million, or 2.8%, following a very strong April. Vehicles and parts sales, an important economic driver, fell by $224 million, or 0.2%, as the downturn in the vehicle market resumed after an uptick in April. The miscellaneous category also saw lower sales, falling by $141 million, or 1.3%.

​Sales were higher on a year-over-year basis, led by a $4.8 billion, or 10.2%, increase in non-store sales. Vehicles and  parts were a close second with a $3.5 billion, or 3.7%, rise in sales, followed by a $3.0 billion, or 10.8%, increase in building and garden supplies sales . Thus, non-store sales were a major driver in sales on both a month-ago and year-ago basis, but vehicles and parts, although strong year-over-year, have been weak on a monthly basis recently. The largest dollar decline in sales was seen in department stores, where sales were down $487 million, or 3.7%. However, the biggest percentage decline was in sports and hobby stores sales, down 4.7% from a year ago.
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If we take out the impact of gasoline sales, which are not really an indication of stronger or weaker economic growth but rather due to changing gas prices, ex-gas retail sales were up only 3.6% from a year ago in May. If we also adjust for inflation, we see that real ex-gas retail sales were up just 1.7% in May, and the growth rate has been trending down.

​Despite this weak report, along with other weak May data, the Federal Reserve raised interest rates. It may be a costly move.
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Retail Sales Rise Less Than Expected in April

5/12/2017

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Retail sales rose 0.4% in April from the prior month, missing the consensus forecast of a 0.6% increase, following a 0.1% increase in March, which was revised up from a 0.2% decline. Sales excluding autos and gas also missed expectations, rising just 0.3% versus the 0.4% forecast. On a year-over-year basis, sales were up 4.5%, down noticeably from the recent peak of 5.6% reached in January.
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Vehicles and parts sales rose the most in dollars from the prior month, increasing by $720 million, or 0.7%. Non-store sales came in a close second, rising by $709 million, or 1.4%, as purchasing online continues to be a more common way to shop. Building and garden store sales followed with a $381 million increase. Non-store sales led the way on a percentage basis, followed closely by electronics and appliances (+1.3%) and building and garden stores (+1.2%). The biggest decline in dollars came from general merchandise store sales, which fell by $304 million, or 0.5%. Grocery store sales followed with a $223 million, or 0.4%, decline, while food and beverage sales fell by $161 million, or 0.3%. Furniture and clothing also saw 0.5% declines.

​Sales were higher on a year-over-year basis, led by a $5.5 billion, or 11.9%, increase in non-store sales. Gasoline sales were a close second with a $4.2 billion, or 12.3%, rise in sales, followed by a $4.1 billion, or 4.4%, increase in vehicles and parts sales . Thus, non-store sales and vehicles and parts were major drivers in sales on both a month-ago and year-ago basis. The largest dollar decline in sales was seen in department stores, where sales were down $478 million, or 3.7%, which was also the biggest percentage decline of any category. This is also taking a toll on department store stocks as earnings continue to disappoint investors.   
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If we take out the impact of gasoline sales, which are not really an indication of stronger or weaker economic growth but rather due to changing gas prices, ex-gas retail sales were up only 3.8% from a year ago in April. If we also adjust for inflation, we see that real ex-gas retail sales were up just 1.6% in April, the same as in March. This measure of retail sales growth, which went negative a year before the headline number leading up to the Great Recession, has been trending down over the last two years and remained weak in April.

​This report, along with slowing wage growth and overall and core inflation in April, may once again give the Fed some pause at its next rate setting meeting in June. Stay tuned!
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Retail Sales Fall in March on Plunge in Vehicle Sales

4/19/2017

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​Retail sales fell 0.2% in March from the prior month, missing the consensus forecast of no change, following a 0.1% increase in February. Sales excluding autos were unexpectedly flat, while sales excluding autos and gas rose 0.1%, also less than expected. On a year-over-year basis, sales were up 5.1%, down slightly from February’s 5.2% pace.
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Food and beverage sales rose the most in dollars from the prior month, increasing by $308 million, or 0.5%. Non-store sales came in a close second, rising by $302 million, as purchasing online continues to be a more common way to shop. Grocery sales followed with a $254 million increase. Electronics and appliances led the way on a percentage basis, as sales rose $212 million, or 2.6%. Strength was also seen in miscellaneous goods (+1.8%) and clothing (+1.0%). The biggest decline in dollars came from vehicle sales, which plunged by $1.3 billion, or 1.5%. Building and garden supply sales followed with a $474 million, 1.5%, decline, while gasoline sales fell by $354 million, or 1.0%. These percentage declines were also the largest of all of the categories.

​Sales were higher on a year-over-year basis, led by a $5.4 billion, or 12.3%, increase in non-store sales. Vehicle sales were a close second with a $5.3 billion, or 6.4%, rise in sales, followed by a $4.4 billion, or 13.7%, increase in gasoline station sales . Thus, while lower vehicle and gasoline sales were major factors in weak overall sales in March, they were big factors in the year-ago comparisons. The largest dollar decline in sales was seen in department stores, where sales were down $620 million, or 4.7%, which was also the biggest percentage decline. 
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If we take out the impact of gasoline sales, which are not really an indication of stronger or weaker economic growth but rather due to changing gas prices, ex-gas retail sales were up only 4.5% from a year ago in March. If we also adjust for inflation, we see that real ex-gas retail sales were up 2.1% in March, a nice rebound from February’s moribund 1.3% growth rate. This measure of retail sales growth, which went negative a year before the headline number leading up to the Great Recession, has been trending down over the last two years. Unfortunately, March’s rebound was not enough to break that trend.

​This report, along with the unexpected decline in consumer prices in March, may give the Fed some pause at its next rate setting meeting in May. Weak March data suggests a rate increase is less likely than a few weeks ago.
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Retail Sales Growth Slows in February

3/15/2017

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Retail sales rose 0.1% in February from the prior month, in line with expectations, but far less than the 0.6% increase in January. Sales excluding autos rose 0.2%, also in line with expectations, while sales excluding autos and gas rose 0.2%, slightly less than expected. On a year-over-year basis, sales were up 5.7%, down slightly from January’s 6.0% pace.
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Non-store sales rose the most in dollars from the prior month, increasing by $610 million, or 1.2%, as purchasing online continues to be a more common way to shop. Building and garden supply stores led the way on a percentage basis, as sales rose $561 million, or 1.8%. Health stores and furniture stores were the only other categories to see monthly gains. The biggest decline in dollars came from gasoline sales, which fell $236 million, or 0.6%. Close behind was a $234 million drop in sales of electronics and appliances, which saw the biggest percentage drop of 2.9%. Vehicles and parts also had a weak month as sales fell $197 million, or 0.2%.

​Sales were higher on a year-over-year basis, led by a $6.0 billion, or 19.6%, increase in gasoline station sales. Non-store sales were a close second with a $5.7 billion, or 13.0%, rise in sales. The largest dollar decline in sales was seen in department stores, where sales were down $751 million, or 5.6%. The biggest percentage decline was in electronics and appliances, where sales were down $514 million, or 6.0%. Thus, while lower gasoline sales were a major factor in weak overall sales in February, they were a big factor in the yearly increase. At the same time, electronics and appliance store sales were weak on both a month-ago and a year-ago basis. 
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If we take out the large impact of gasoline sales, which are not really an indication of stronger economic growth but rather due to higher gas prices, ex-gas retail sales were up only 4.6% from a year ago in February. If we also adjust for inflation, we see that real ex-gas retail sales were up only 1.8% in February. This measure of retail sales growth, which went negative a year before the headline number leading up to the Great Recession, has been trending down over the last two years.

​Just as the Fed looks at prices excluding gasoline to determine the underlying trend of inflation, doing the same thing for retail sales gives us a better look at the underlying trend of retail sales. With this measure of sales growing slower, today’s rate increase may a bigger thorn than many think.
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Strong Auto Sales Lift Retail Sales in May

6/13/2013

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Retail sales rose 0.6% in May from the prior month, better than the expected 0.5% increase and a nice rebound from the meager 0.1% rise in April. Motor vehicle and parts dealers led the way with a 1.8% increase. Excluding autos, sales rose 0.3%, slightly less than the 0.4% consensus. Overall sales were up 4.3% from the prior year, an improvement over the 3.7% pace in April, while sales excluding autos were up 3.4%, also better than April's 2.9% clip.

Building and garden supply stores saw sales rise a healthy 0.9%, although this was down sharply from the 3.6% pace in April. The cool and wet weather likely played a role in keeping these sales contained. Strength was also seen in food and beverage stores, with sales rising 0.7% on the month following a 0.6% dip in April as stronger job growth allowed folks to loosen up the purse strings a bit on meals. On the other hand, most of the improvement was for meals at home, as sales at food and drinking places fell 0.4% after a 1.1% increase. It is likely that weather played a role here too as customers desiring to eat at establishments with outdoor seating decided instead to stay home during a cooler-than-average May.

Despite the resurgent housing market, sales at furniture and home furnishing stores dropped 0.8% in May following a 0.2% dip in April, and were down 0.5% from the prior year. This is interesting considering both home prices and job growth accelerated during the month. Weather could have played a part here too. Nobody wants to get a new couch delivered when it's pouring rain outside. We may see a rebound in furniture sales in June if the weather turns more seasonal.

Overall, the report was a good sign for consumer resilience and economic growth, especially in light of higher payroll taxes. Decent job growth should help to support sales in the near term. However, with savings rates so low (2.5% of personal disposable income as of April) and personal income growth slowing over the past couple of months, it remains to be seen how long consumers can keep up this pace of spending without even stronger job growth or healthier income growth. Without these, we could see a softer spending trajectory in the second half of the year.
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