Retail Sales Plunge Again In January

February 12, 2015 0 Comments

Last month, we’ve had a larger than expected plunge in retail sales for the month of December. This month, pretty much the same thing happened. Sales in January falling 0.8% while missing the consensus estimates of -0.4 is spurring a lot of questions whether or not the consumer spending is truly picking up in the way most people believed in the GDP reports. Then again, some of us already know the reason behind that.

Personal Spending Contributions

This makes retail sales the worse back-to-back drop since 2009. If you exclude motor vehicles and parts, sales actually dropped a full percent. The largest drop in sales was in the form of gasoline receipts at gas stations, most likely due to the fall in gas prices. It was forecasted (for months) that the fall in gas prices would result in a pickup in consumer spending in other areas in the economy. This also didn’t happen, due to consumers using the low gas price stimulus to pay down debt or save for a rainy day (or to pay for Obamacare).

Naturally, everyone will simply blame lower prices at the pump for this, but neglect the fact that retail sales dropped in 5 other categories as well. Even if you don’t account for gas station sales, retail sales would have had a very weak increase (if any increase at all) of maybe 0.1%. 1 basis point is definitely the weakest the economy would have had in a while, but no where near as bad as -0.9%.
January Retail SalesAnd this is the full breakdown of Retail Sales and Food Services, by business type:
Retail Sales Business TypeThere is also this faulty narrative I keep hearing about an acceleration in economic growth. This doesn’t seem to be happening. For the prior two months, we’ve had bad retail sales numbers. horrible durable goods numbers, initial claims are bouncing back above the 300K threshold once more. We get a good payroll number and we say everything is great.

I guess as long as consumer sentiment keeps rising, we can continue to lie to ourselves…

 

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