August Retail Sales YoY Increase Powered by Food and Gas

August's retail sales report came out today and for some bizarre reason many in the media are reporting the data as a decline of -0.3%, despite the fact that the -0.3% is the month to month decline from July '08, and retail sales were actually up 1.6% on a YoY basis.

(From the U.S. Census Bureau):"The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for August, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $381.2 billion, a decrease of 0.3 percent (±0.5%)* from the previous month, but 1.6 percent (±0.7%) above August 2007. Total sales for the June through August 2008 period were up 2.3 percent (±0.5%) from the same period a year ago. The June to July 2008 percent change was revised from -0.1 percent (±0.5%)* to -0.5 percent (±0.3%).

Retail trade sales were down 0.3 percent (±0.5%)* from July 2008, but were 1.3 percent (±0.7%) above last year. Gasoline station sales were up 22.5 percent (±1.8%) from August 2007 and sales of food and beverage stores were up 6.9 percent (±0.8%) from last year."

After months of reporting the numbers on a YoY basis they're now reporting it on a month to month basis, despite the fact that the YoY number is more positive than the month to month one?

Weird.

All that being said, the YoY increase was largely driven by increases in food and gas prices; here is a look at % YoY change in retail sales over specific categories, I broke out a number for retail excluding gas, groceries, cars, etc, in order to get a handle on spending on discretionary purchases.

• Retail (excluding Groceries, Motor vehicles & Parts, Health & Personal Care, and Gas Stations): 7.79%
• Car Dealers: -14.9%
• Furniture & Home Furnishings Stores: -6.77%
• Electronics & Appliance Stores: 1.19% 
• Building Materials & Garden Supply Stores:  -2.67%
• Grocery Stores: 6.89%
• Gas Stations: 22.54% *Recent price declines aren't as important as the YoY change in terms of the cost impact to a household's budget.
• Clothing: 1.20%
• Health & Personal Care Stores: 3.22%

Judging by the sampling above it appears that consumers are only spending more (on a nominal basis at least) in areas where they're forced to due to higher gas prices, food prices, etc, and are undoubtedly receiving fewer goods per dollar than they used to. Let's also not forget that spending on gasoline has been increasing all year despite the fact that gasoline "consumption" is decreasing. It's also worth noting that the YoY decline in discretionary spending (as I've defined it at least) is probably greater than the numbers suggest, as inflation from higher energy prices impacts nearly all businesses in one way or another.

While a recent WSJ blog post suggested that we may be at the "End Golden Age of Consumer Spending," I think we have to withhold judgment on that one until such time where the economy has recovered and consumer spending is still declining/stagnant. At this point I think a likely scenario is that some consumers will indeed pull back on spending, with the rest returning to their old habits once the economy recovers. Either way it's all speculation at this point and it remains to be seen how it will all shake out.

You can read the Census Bureau report in its entirety here.

Sources

U.S. Census Bureau:"Advance Monthly Sales For Retail Trade And Food Services; August 2008" -- September 12, 2008.

Comments

[Reinko:]

As far as I know statistical reality, retail sales are a so called 'value index' so it is not a price index or a quantity index.

Value indices are very simple, you do not have all that Paasche or Laspeyres stuff that come along with the price and quantity indices.

So life is simple to understand: How did the census bureau filter out the prices? Do they have some deflator just like we have with the GDP?

Do they use core inflation or do they have a wider estimate of price climbs and if so; is it a consumer price deflator or a wide economy deflator?

I think the title of this article says it all:

August Retail Sales YoY Increase Powered by Food and Gas

Question: Do you really believe more goods and services are transported if food and gas are truly filtered out from the statistics?

2008 Sep 14 05:57 PM