The Truth Behind February's "Strong" Retail Sales Report

I put off doing an analysis of February's retail sales report until the CPI for February came out. I wanted to know how much of it was just inflation.

In the following chart I'm adjusting the sales for population growth (which I ballpark estimated to be 170,000 for February) and inflation as seen in the consumer price index.


Click to enlarge.

53% of the real increase per person came from gasoline stations. The total rises to 86% if we throw in motor vehicles. And lastly, it rises to 97% if we throw in building supplies and gardening equipment.

So let's try to make some sense of why these three things are driving growth.

March 2, 2012
Automobile Sales Rise in February by 16% With Increasing Demand for Fuel Efficient Cars

Auto sales in the U.S. picked up to the fastest rate in four years strengthened by the climb in sales of fuel-efficient vehicles as gasoline prices continued to surge.

That takes care of gasoline and motor vehicles.

March 13, 2012
Get going on the garden

TORONTO - Have you heard there’s a a food revolution going on?

More specifically there is a grow-your-own revolution happening around the world.In fact one of the top trends in gardening in 2012 is vegetable gardening, and with this mild start to March, many are thinking about popping out some peppers this summer.

Rising gasoline prices are pushing up the price of food. This certainly helps explain at least some of the increased gardening equipment demand.

As seen in the chart, clothing did well too. I would guess that people want to look sharp at their next job interview, especially with unemployment at 8.3%. Rumor has it that at least a few companies have decided to hire a few workers, well, at least until the next recession (whenever that is).

And lastly, no report would be complete without at least a bit of heckling and sarcasm. So brace for it.

March 14, 2012
Retail Sales Flex Their Muscles in February

This is a very healthy number and shows that retail and consumers are still alive and well.

I'm not seeing it.

Let's address gasoline front and center. It was the fastest-growing part of the number. It wasn't because people bought more gasoline, it was because gasoline cost more.

Oh yes, that's prosperity all right. No doubt about it.

So gasoline grew 3.2%, and it is a meaningful contributor to the index. That certainly was a help.

It was a help? To who? And the 3.2% growth number clouds all the useful information. Gasoline station sales represented a whopping 53% of the inflation adjusted per capita growth! That's what the data shows.

If you strip out the autos and the gasoline effect, we were still up 0.6% sequentially or about 7.2% annualized. Or if you look on the year-over-year basis, which is a good way to look at it, we were still up 5.8%. Both are very healthy numbers.

As seen in my chart, if you strip those two things out then there is almost no real growth per capita left. Seriously.

Well, the bigger question is almost what didn’t do well because only one category was actually down. It was kind of good across-the-board. But there was a lot of strength.

Look at the chart again. There was little *real* strength across-the-board. He's dreaming.

Building materials also was good, up 1.4% month to month, but that might be because people are starting their gardening a little earlier and maybe doing a little bit of home fix-ups, too.

It might indeed be that people are starting their gardening a bit earlier, especially if they are hungry in this brave new economy. 15% of our population is on food stamps. No joke. So let's talk about that warm weather we've been having.

March 14, 2012
Is Warm Weather Putting a False Shine on the Economy?

With a national average temperature of 38.3F, this February was 5 degrees warmer than last February and 4 degrees warmer than the last five Februarys. Going back to 1920, this is the fourth-warmest winter on record. According to Bank of America Merrill Lynch (BAC) U.S. economist Neil Dutta, those high temperatures skew the seasonal adjustments the government makes to winter economic data in order to compensate for lower activity. “If the winter is unseasonably mild, those seasonal adjustments aren’t appropriate,” says Dutta. “It’s overcompensating, which makes the data look better than it is.”

If this "strong" report does look better than it really is then you might want to think a bit defensively. And why is that? In my opinion, February's retail sales report already sucked (pardon my language). This just makes it worse.

Chances are incomes won’t grow much over this spring, which means that if you spent money in January and February you hadn’t intended to, you probably won’t have much to spend come April or May. But look on the bright side: At least the warm weather comes free.