Wednesday, 22 of May of 2019

Economics. Explained.  

Category » Retail Sales

Retail Sales

May 15, 2019

Retail sales fell 0.2% in April after having jumped 1.7% in March.  Retail sales have been particularly volatile,in a see-saw up-then-down pattern, for the past six months.  Despite considerable volatility retail sales have risen a solid 3.1% in the  past year .

Sometimes sales can be distorted by changes in autos and gasoline which tend to be quite volatile.  In this particular instance car sales rose 0.1% in April.  Gasoline sales rose by 1.8%.  Changes in gas prices  impact the overall change in sales, but they typically do not reflect any significant change in the volume of gasoline sold.

Perhaps the best indicator of the trend in sales is retail sales excluding the volatile motor vehicles and gasoline categories.  Such sales fell 0.2% in April after having surged 1.1% in March.   This series has also been volatile in recent months.   In the last year retail sales excluding cars and gasoline have risen a relatively robust 3.2%.

While there has been a lot of disappointment about earnings in the traditional brick and mortar establishments  the reality is that they need to develop a better business model.  The action these days is in non-store sales which have been growing rapidly. Consumers like the ease of purchasing items on line.  While sales at traditional brick and mortar general merchandise stores have risen 2.7% in the past year, on-line sales have risen 9.2%.  As a result, their share of total sales has been rising steadily and now stands at a record 11.8% of all retail sales.

We expect retail sales to climb slowly in the months ahead.  First, the stock market recovered all of its fourth quarter decline, recently established a record high level, and is currently only 3% below that new peak..

Second, the economy continues to crank out 190 thousand jobs a month,  Those job gains will produce growth in income.

Third, real disposable income (what is left after paying taxes and adjusting for inflation) has been growing at a respectable 2.3% pace.

Fourth, as the Fed tightened steadily for the past couple of years mortgage rates rose to 4.9%, but in the past couple of months as the Fed has pledged to refrain from any further rate increases at least until midyear and as inflation has remained in check, the 30-year mortgage rate has fallen to 4.1%.  That should bolster the housing market as we move into the spring.

Finally, consumers have paid down a ton of debt and debt to income ratios are very low.  That means that consumers have the ability to spend more freely and boost their debt levels if they so choose.

Thus, the pace of consumer spending should rebound in the months ahead.  We continue to expect GDP growth to rise 2.7% in 2019 after having climbed 3.0% last year.

Stephen Slifer


Charleston, SC

Car and Truck Sales

May 5, 2019

Unit car and truck sales fell 5.8% in April to a 16.4 million pace after having jumped 6.5% higher in March.  Stocks have been volatile in recent months but during the last year car sales have fallen 4.5%.  But the softness in car sales is not the result of an inability of consumers to afford cars.

Consumer confidence got hit late last year but it has already recovered almost all of what it lost and remains at a lofty level.

Confidence will remain solid simply because the economy continues to crank out 190 thousand jobs per month.  Steady growth in jobs means continuing growth in income.  At 3.6% the unemployment rate is at a 50-year low so almost everyone who wants a job has one.

Driven by the steady jobs gains, real disposable consumer income (what is left after taxes and inflation) is rising at a solid 2.3% pace.

Meanwhile, consumers have paid down tons of debt and are now in a position to spend.  At the same time, mortgage rates have fallen almost 1.0% to 4.1% in the past couple of months.  For all of these reasons we look for  2.7% GDP growth in 2019 after a 3.0% increase in 2018.  Thus, the consumer is in good shape to continue to spend at a brisk pace in 2019.

However, the reality is that many Americans, particularly younger Americans, are less enamored with owning a car than their parents.  Ones who live in larger cities have chosen not to own a car but to use ride-sharing services like Uber or Lyft.  At the same time Americans preferences have shifted away from sedans to SUV’s of varying sizes.  The car manufacturers are only now beginning to adjust production towards the different mix of cars being sold.  Thus, we expect car sales to remain fairly steady at roughly their current pace in the months ahead.

Stephen Slifer


Charleston, SC