The US Census Bureau’s retail sales figures are based on a random sampling survey of approximately 5,000 retail and food services firms whose sales are then weighted to represent the complete universe of over three million businesses. Responding firms account for approximately 65 percent of the dollar volume estimate. The statistic is an advance measure of overall retail sales, and is important for those interested in the demand side of the economy.
The Census Bureau’s estimate of retail and food services sales for August, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $444.4 billion, an increase of 5.0 percent from August of 2013. Total sales year to date are up 3.7 percent from the same period a year ago, suggesting that demand is well outpacing inflation.
Retail sales are generally being pushed by auto and other motor vehicle dealers which were up 8.0 percent over last year. In fact, as was noted earlier in this report, the automotive industry is one of the key drivers keeping GDP growing. At the same time, hobby and book stores and department stores suffered sizable declines in sales off 2.7 and 2.5 percent respectively from the prior year. Much of this likely reflects competitive pressure from non-store retailers (or internet and catalogue sales) which were up 6.5 percent on the year.
One factor that swings the monthly retail sales figures wildly is sales at gasoline stations, which reflect world demand for fuel rather than demand. So far this year, energy costs have fallen, so gasoline stations sales are off by about 1.2 percent. Gas stations reflect about 10 percent of overall retail sales figures so this is a major dampening effect.
While extremely important for many mainstream economists, the retail sales figures say little about production or whether the overall economy is strengthening. One factor that does suggest an improving economy is that restaurant sales are up by 4.5 percent on the year while grocery sales are up just 2.8 percent. This could signal that more people are feeling comfortable about dining out more often which is a good economic indicator.
We believe that continued slow growth in the economy will keep pressure on consumers to search for bargains and to focus their spending on necessities and away from non-essentials. This, of course, does not mean that the overall luxury brand and luxury goods markets will be greatly pinched as they reflect sales from upper income consumers who have been less impacted by the recession, and who are now benefitting from the current equities bubble.
One medium term concern is the new focus in Congress to force internet retailers to collect state sales taxes even where they do not have nexus, or allow states to tax internet access in general. The rapid growth in non-traditional retailing will continue to exacerbate this situation.
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