Don't Be Misled by Headlines

In a recent article, the headline said that the January drop in retail sales bodes ill for GDP reports.  That is certainly an attention-getting headline, especially because it suggested that GDP may we be weakening, and a macroeconomic problem is imminent.  This is another case where reality is much different than the headline.  

The problem is that the Commerce Department provides actual data and seasonally adjusted data (data that is manipulated and “adjusted”).   Retail Sales experienced a 19.25% drop from December to January, inclusive of automobile sales.  Exclusive of auto sales, the drop was 18.9%.  The decline by either measure was milder than normal. The 19.25% drop was the second mildest in the last 10 years (last year was milder).  

Don’t be misled by headlines.  The US consumer continues to push the economy onward and upward.  We are projecting that there will a more noticeable slowing in the economy later this year, but the January drop in Retail Sales does not show any unexpected, near-term troubles for GDP.