Another Sign of Recovery: Retail Sales End Free-Fall

Retail sales fell modestly in April, but they were higher than in December. The big story here is not the month to month changes, but the fact that the free-fall in sales which began last August has almost certainly ended. This is what a bottoming process should look like.

The things to watch for signs of a recovery are the things that trade in real-time. That's where the action is, and there are no lags in the data to worry about, no faulty seasonal adjustment factors, etc. On that score, industrial spot commodity prices are up 15% from their December lows, industrial metals prices are up 30% from year end, petroleum products are up almost 40% from year end, and shipping rates are up 180% from year end.

According to the AAA, nationwide average prices for regular and premium unleaded gasoline at the pump are up 10% so far this month. And of course equity prices are up by one-third from their lows in early March. To me, the bulk of the evidence weighs in favor of an economy that is slowly recovering.

Comments

[ciel:]

Hmmm.

Let's take a look at this year-over-year (credit CR)
1.bp.blogspot.com/_pMs...

Well, this sure isn't a recovery signal like the recovery signal retail sales gave in November, 2001 (the end month of the last NBER-defined recession).

If retail sales only fell in April after a solid gain in March, I might be inclined to go along with this point of view, myself. But March retail sales contracted pretty sharply (at a worse than originally reported, -1.3% rate) , and April's retail sales even included Easter holiday purchases. One would think that should have reversed the steep slide from the month before, if this recovery is truly at hand.

It looks to me that the strong start to the New Year may have been nothing more than an Obama (Hope) bounce hitting at the same time transfer payments were raised and Christmas gift cards were spent.

Two, three, four months later, seems to me it's just back to pre-Lehman reality. To that end, we're in "recovery."

May 14 05:05 AM

[Alan von Al...:]

Needs to be corrected for population growth, esp 'undocumented.'

May 14 05:36 AM

[Alan von Al...:]

California food stamp households almost doubled 2008-1Q2009, for instance, so we need to discount retail sales to reflect 'free riders' if you want to use it as a recovery indicator. Maybe the right way to do this is to strip out food and fuel, i.e., use discretionary purchases as an indicator. Maybe compare retail employment. A million retail jobs were cut 2008-1Q2009. I don't see any green shoots.

May 14 05:52 AM

[CautiousInv...:]

The bounce in consumer spending in the first two months of the year are becoming a fading memory and April's declines with March revisions downward reflect a heavily distressed consumer.

It is also means that the 2.2% increase in consumer spending in Q109 GDP is unsustainable and suggests Q2 growth will likely lack impetus from consumer spending.

May 14 07:47 AM

[kelm:]

Are metal prices up because the US is consuming more metal or because supply has been restricted due to mine and smelter closures and China is importing at a strong rate both for use and stockpiling? I agree that there is evidence that there are pockets of strong recovery globally, China being the main one, and I agree that our own economy is no longer in free fall. Whether we will see actual growth anytime soon, especially in jobs, remains to be seen.

May 14 11:19 AM

[pokernut:]

This pumper has no sense of shame. He has been very wrong all the way down.

May 14 11:19 AM

[pokernut:]

"It's clear to me that the economy is not going to be very strong, but at the same time it's hard to find signs of impending disaster. There's a decent mix of weakness and strength out there." - Scott Grannis, August 4, 2007

May 14 11:28 AM