8/14/2019 It is Too Soon to Buy Into a Stabilization of Retail
Sales
1/1
Wachovia Economics Group publications are published by Wachovia
Capital Markets, LLC (WCM). WCM is a US broker-dealer registered
with the US Securiand Exchange Commission and a member of the New
York Stock Exchange, the Financial Industry Regulatory Authority,
and the Securities Investor ProtectCorp. This report is for your
information only and is not an offer to sell, or a solicitation of
an offer to buy, the securities or instruments named or described
in treport. Interested parties are advised to contact the entity
with which they deal, or the entity that provided this report to
them, if they desire further information. Tinformation in this
report has been obtained or derived from sources believed by
Wachovia Capital Markets, LLC, to be reliable, but Wachovia Capital
Markets, Ldoes not represent that this information is accurate or
complete. Any opinions or estimates contained in this report
represent the judgment of Wachovia CapMarkets, LLC, at this time,
and are subject to change without notice. 2009 Wachovia Capital
Markets, LLC.
Mark Vitner, Senior Econom
[email protected] 704-383-5Adam G. York, Econom
[email protected] 704-715-9
Retail SalesMonth-over-Month Percent Change
-3.5%
-2.8%
-2.1%
-1.4%
-0.7%
0.0%
0.7%
1.4%
2.1%
2.8%
3.5%
2005 2006 2007 2008 2009
Retail Sales: Feb @ -0.1%
Retail SalesIndex July = 100, Not Seasonally Adjusted
70
75
80
85
90
95
100
105
110
115
120
Jul Aug Sep Oct Nov Dec Jan Feb
2001-2007 Average
2008
Retail Sales Bounced Off Recent Lows But That Is Not
Stabilization
Retail sales fell just 0.1 percent in February, following a
surprising
1.8 percent jump in January. The better showing followed six
consecutive
monthly declines, the last three of which were monstrous. Since
consumer
spending makes up two-thirds of real GDP, the unexpected
improvement
in retail sales was heralded as a sign the economy might be
stabilizing.
While we hate to rain on anyones parade, claims that the past
two monthsretail sales data are signs of stabilization in the broad
economy are just
wishful thinking. Seasonal adjustment accounts for all the
improvement.
Retail sales are adjusted for seasonal variation and holiday and
trading day
differences. Such adjustments are necessary so that we can look
at retail
sales on a month-to-month basis and so that we can also adjust
for holidays
that move about the calendar a bit, such as Thanksgiving and
Easter. In
addition, this process helps take into account leap years. While
theintentions of seasonal adjustment are to smooth out distortions
in the data,
sometimes they serve to amplify them. We believe this is the
case today.
We have indexed two series: overall retail sales and retail
sales excluding
motor vehicles, gasoline and building materials stores, back to
July. The
bars shows the average change from the July level for the past
seven years
and the line shows what has happened this past year.
Back-to-school salesnormally push retail sales higher in August and
then sales fall back in
September. October and November typically see modest gains and
then
sales surge as the holiday season kicks into full swing in
December. Retailsales then plummet in January and slide further in
February.
This past year saw sales take a slightly different path. Overall
sales fell
slightly in August and then fell more sharply than usual in
September.
Instead of rising in October and November, sales fell, slightly
at first and
harshly in November. Sales did rise in December but nowhere near
as
much as usual. Since sales did not rise as much as they usually
do, sales
did not fall as much as usual either, dropping 19 percent in
January instead
of the usual 21.3 percent. The smaller than usual non-adjusted
drop is
what produced the large seasonally-adjusted gain reported that
month.
Oddly enough, sales fell more than usual in February, falling
3.9 percent ona non-adjusted basis compared to a typical drop of
around 0.8 percent, but
the adjusted figures somehow show just a 0.1 percent drop.
We repeated the same process for retail sales excluding motor
vehicles,
gasoline and building materials and found similar results. Sales
for this
key core spending measure did not rise anywhere near as much as
usual
going into the holiday season, so the subsequent declines look
less
spectacular than usual. The underlying trend, however, is
unmistakably
weak and casts real doubt on the notion retail sales are
stabilizin .
March 30, 2
It Is Too Soon to Buy into a Stabilization of Retail Sales Are
retail sales stabilizing? We doubt it. While we concede the rate of
deceleration in the economy maydecelerating, much of the recent
improvement in retail sales has simply been due to seasonal
adjustment. In a renon-seasonably adjusted world, retail sales are
considerably weaker and show little sign of stabilizing.
Retail Sales Ex-Autos, Gas, Bldg. Mats.Index July = 100, Not
Seasonally Adjusted
80
90
100
110
120
130
140
Jul Aug Sep Oct Nov Dec Jan Feb
2001-2007 Average
2008
mailto:[email protected]:[email protected]:[email protected]:[email protected]
