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%.
Still, this is only one month of data - and my continued argument is that the consumer is in trouble. My Instablog not only wraps up this week's economic releases - but discusses the troubling Wal-Mart (NYSE:WMT) sales forecast decline.
Everything is relative - and retail sales were relatively strong in July.