They Said What?!

The media reported the following for May retail sales:

• Retail Sales Fell in May, in Latest Sign of a Bumpy Recovery (The New York Times)
• US Retail Sales Drop… (various)
• US Retail Sales Take a Step Back… (Reuters)

These statements are extremely interesting, because the data we use from the US Census Bureau shows the exact opposite. US Retail Sales in May came in 2.99% above April, and the single-month number, the quarterly trend (three-month moving total), and the annual trend (12-month moving total) are all at record highs. The input from these metrics and from the rates-of-change is very encouraging in terms of ongoing economic expansion through at least the near term. Other leading indicators, including the ITR Leading Indicator^TM, are signaling that the economic recovery and rise will last through 2021 and into 2022. Statements about a decline in retail sales may lead some to think that the recovery is in danger of running out of steam. There are no indications of that happening in 2021. We do have some preliminary indications from several leading indicators that the US economy – as measured by GDP and retail sales – will be slowing in its ascent in 2022, but that is normal and to be expected.

The media statements prompted us to take a deeper look at retail sales to see if there was more going on than meets the eye, especially given current inflationary pressures. (We think the current spike in inflation will be temporary, but that systemic inflation through 2023 will be greater than what we have grown accustomed to post Great Recession.) Total Retail Sales adjusted for inflation posted a 2.17% increase over April and continued to establish record highs for the monthly, quarterly, and annual trends. The seasonal rise in the quarterly trend is the steepest on record.

Skeptics could point out that gasoline prices have been rising, and so perhaps that is where the overall April-to-May rise came from. However, Retail Sales Excluding Automobile Sales and Gasoline posted an increase from April to May on both a nominal basis and an inflation-adjusted basis. Further, both versions showed record-high quarterly trends and the steepest seasonal rise on record. Clearly gasoline and automobiles were not providing an artificial boost to the overall May retail sales figure.

Two previously troubled segments of retail sales are also posting very encouraging numbers. First, Retail Sales for Food Services and Drinking Places reached a record high in May, coming in at $71.319 billion, as people left their homes and went out to restaurants and other eating and drinking establishments. The previous record high was in August 2019, which means this is more than just a COVID recovery; the industry is experiencing a full-fledged cyclical recovery. The seasonal rise is the steepest on record, indicating that the May figure is not a one-off piece of good news.

Second, and, perhaps most surprising to many, Retail Sales for Department Stores in May were 11.63% higher than in April, with the second-strongest seasonal rise on record.

People are spending, and that is an important part of what is driving the overall economy forward. The increase in jobs and wages provides encouragement that the economic engine called retail sales will continue to provide good news for the economy, even as enhanced federal unemployment benefits are phased out in September. Readers who operate in the business-to-consumer space should plan on a good year ahead. The decelerated rate of rise anticipated for 2022 will come at different times for different businesses. Please develop your own rate-of-change and compare your business to key economic indicators. Try our DataCast™ program at no cost to see how rates-of-change and leading indicators can help you see into the future with incredible confidence

Alan Beaulieu
President