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Retail Sales: A Closer Look at the Numbers

Retail Sales were in the news on Wednesday, and the headlines/lead broadcast comments were not encouraging.  The news anchor said retail sales were disappointing and probably related to weather (again with the weather!).  Retail Sales (excluding auto sales and not adjusted for inflation) were off 0.58% from March to April.  As I write this the pundits are saying that the winter weather hurt retail sales in March and April.  Really?  Let’s look at the numbers. 

Retail Sales excluding autos in March rose a steeper-than-median 12.56% from the prior month but followed by the edge downward of 0.58% in April from March.  The March-April change is normal (just slightly steeper than median) and a significant improvement over the last two years which saw declines of -3.98% in 2012 and -3.05% in 2013.  It would seem that the consumer did well by historical standards.  The annual growth rate in Retail Sales is holding steady at 2.7% with the quarterly year-over-year growth rate at 1.9%.  There is some downward cyclical pressure on Retail Sales, but it is well within the parameters of normal.  The news and some CEOs are just looking for a proximate cause for a normal event.  The actual trend is consistent with our macro forecast for the rest of the year.

The stall in the housing industry is having an impact on Building Material and Garden Equipment Retail Sales.  The annual year-over-year growth rate of 5.9% is healthy, but slower growth is evident.  Consumers are spending in this sector, but the rate of spending is slowing down in conjunction with the stall in housing sales.  This is also consistent with our forecast for the rest of the year.

Automobile Retail Sales fell 9.55% from March to April.  That is steeper than normal but not a cause for significant worry given that the decline is considerably milder than the April declines in 2012 and 2013 (where the economy continued to grow), and the soft April number comes on the heels of a good February and March.  The 6.3% year-over-year annual growth rate is stable for the moment, but a slower rate of growth is expected as the year unfolds.

All in all, April Retail Sales were not disappointing or surprising.  The consumer is slowing in the rate of spending but not by enough to cause a recession later this year.  Neither is it a weather related event, as given by the normalcy in the numbers in comparison to the severity of the weather.  The economy is going to slow in its rate of growth in the second half of the year; it is not going to bounce back or ramp up in the latter half of 2014 as some pundits suggest.  Keep your cash flow projections in tune with that outlook, and your profits and cash position will put you in a good position for 2015.

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