Retail sales show an economy that is falling less quickly

Tuesday, April 14, 2009

The Census Bureau released its advanced retail sales report; and for March, this was a pretty miserable report:

advance estimates of U.S. retail and food services sales for March, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $344.4 billion, a decrease of 1.1 percent (±0.5%) from the previous month and 9.4 percent (±0.7%) below March 2008. Total sales for the January through March 2009 period were down 8.8 percent (±0.5%) from the same period a year ago. The January 2009 to February 2009 percent change was revised from -0.1 percent (±0.5%)* to +0.3 percent (±0.3%)*.
What I see in the report is a really weak 4th quarter of 2008 compared to an even weaker first quarter in 2009. However, you will notice that the story is consistent with the “economy is falling slightly less quickly” story, at least in consumer spending. In Q1 2009, retail sales, which account for roughly 31% of overall GDP, fell at a smaller 1.2% over the quarter compared to the 7.1% tumble seen in Q4 2008. Retail sales are about 45% of aggregate personal consumption expenditures, which in turn, were 69% of total GDP in Q4 2008, so 0.45*0.69=0.31.

The report clearly highlights the downside risks to consumer spending; but nevertheless, is consistent with slight improvements in some of the economic indicators. However, the March report illustrates the clear downside risk of job loss, economic uncertainty, and overly levered households to consumer spending.

Rebecca Wilder


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