Deflating retail sales
Posted 03:55 p.m., May 12, 2008
As I mentioned in this morning’s update, the Census Bureau’s monthly report on April retail sales is scheduled for release tomorrow. The consensus forecast is for a decline of 0.1 percent from April. Given the low levels of consumer confidence reported by most surveys, a decline that small would be something of a triumph for retailers.
Because the retail sales number is a dollar figure, it includes the effects of price increases (i.e., inflation), and the Census Bureau doesn’t report an inflation-adjusted monthly number. However, the bureau does break out separate numbers for various subsectors, so it’s possible to construct a “core” figure for retail sales that’s similar to the “core” inflation number so popular with economists – that is, one that excludes food and gasoline.
Here’s what the year-over-year percentage change looks like for that “core” retail figure:
As is evident, this data series went negative last month for the first time since 2002. In fact, until last month, this series (admittedly a rather small data sample) had gone negative in just two months, September 2001 and October 2002. The first of those months obviously was affected by the 9/11 terrorist attacks and the recession that began in March 2001; the second looked bad mainly because it was being compared with the big retail rebound that took place the month after the attacks.
Last month’s “core” figure was down only a tiny 0.17 percent. Given the government’s tendency to revise its economic data repeatedly, it’s possible that tomorrow’s report will make that decline disappear by revising the March figure upward. Either way, though, it’s clear that if you exclude the effects of soaring energy and food prices, the retail sector looks pretty weak.
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