One chart makes clear why the next year of retail sales will be a big disappointment

Last week, retail sales figures for February were a huge disappointment.

Sales plunged 0.6% against expectations for sales to grow 0.3%.

Economists were quick to blame the poor winter weather the US experienced in February.

But even allowing some pullback from the weather, this latest report shows one that of the big themes economists hammered on as gas prices plunged late last year has failed to come to fruition: consumer spending hasn’t increased.

In a note to clients on Tuesday, Sean Darby and the equity strategy team at Jefferies highlighted the following chart, showing that while economists have been looking for an uptick in consumer spending, consumers have actually indicated that they intend to spend less money over the next twelve months.

Darby and his team also highlighted this chart, showing that expectations for income growth have increased.

Of these two charts, Jefferies said only, “Income expectations have climbed but interestingly spending expectations have dropped.”

Now, given that the first chart indicates year-over-year spending growth expectations, it could be viewed as simply a reflection that consumers will be spending less on gas.

But perplexingly, spending at gas stations actually increased 1.5% in February.

And so the economic thesis that the decline in gas prices would lead to more spending from consumers is predicated on consumers taking those gas savings and actually spending it, not saving.

According to the latest data on personal saving, it looks like consumers are doing just that — saving.

Economists have been expecting consumer spending to increase since late 2014, as oil prices and subsequently gas prices plunged. The idea is simple: consumers take the gas savings and use that money to buy other stuff — clothes, cars, iPhones, meals out, whatever.

The small items, like clothes and meals out, are expected to see the first benefits. And as we’ve noted, spending at restaurants and bars has been surging.

But otherwise, consumer spending has disappointed even in the face of expected for wage growth. And it looks like this trend might continue.

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