Real Retail Sales Per Capita: Another Perspective On the Economy
Doug Short | Mar 19, 2014 01:40AM ET
The Advance real-time update .
With yesterday's release of the Consumer Price Index, we can now dig a bit deeper into the "real" data, adjusted for inflation and against the backdrop of our growing population.
The first chart shows the complete series from 1992, when the U.S. Census Bureau began tracking the data in its current format. I've highlighted recessions and the approximate range of two major economic episodes.
The Tech Crash that began in the spring of 2000 had relatively little impact on consumption. The Financial Crisis of 2008 has had a major impact. After the cliff-dive of the Great Recession, the recovery in retail sales had taken us (in nominal terms) 13.7% above the November 2007 pre-recession peak. The new high was in November of last year.
The green trendline is a regression through the entire data series. The latest sales figure is 6.3% below the green line end point.
The blue line is a regression through the end of 2007 and extrapolated to the present. Thus, the blue line excludes the impact of the Financial Crisis. The latest sales figure is 19.8% below the blue line end point.
We normally evaluate monthly data in nominal terms on a month-over-month or year-over-year basis. On the other hand, a snapshot of the larger historical context illustrates the devastating impact of the Financial Crisis on the U.S. economy.
h3 The "Real" Retail Story: The Consumer Economy Remains at a Recessionary Level/h3How much insight into the US economy does the nominal retail sales report offer? The next chart gives us a perspective on the extent to which this indicator is skewed by inflation and population growth. The nominal sales number shows a cumulative growth of 160.3% since the beginning of this series. Adjust for population growth and the cumulative number drops to 109.1%. And when we adjust for both population growth and inflation, retail sales are up only 23.0% over the past two-plus decades.
By this analysis, adjusted retail sales ex gasoline was up 0.1% in February from the previous month and up only 0.4% year-over-year. However, it's down 6.9% from its all-time high in June 2005.
The Great Recession of the Financial Crisis is behind us, a close analysis of the adjusted data suggests that the recovery has been frustratingly slow. The sobering reality is that, in "real" terms — adjusted for population growth and inflation — consumer sales remain at the level we saw about three months into the last recession.
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