Retail Sales Growth: Probably Meaningless


Surprising good news: January retail sales were up 1%, which exceed economists’ expectations. It was the first time in 8 months that sales ticked up.

Not surprising: The numbers are probably meaningless. Ian Sheperdson of High Frequency Economics points out:

In Jan itself, both auto sales, up 1.6%, and core sales ex-autos gas and food, up 0.5%, were stronger than we exp-ected. It is impossible to square these numbers with the unit auto sales data or the Redbook chain store numbers, so we expect either downward revisions or offsetting sharp declines in Feb. The underlying trend in core is still clearly downwards – the Jan core gain has to be set against five straight declines aver-ageing 1.1% – and there is no reason to expect any recovery soon. The headline relief today is welcome but it is unlikely to last.

Here’s more from economist Richard Moody of Mission Residential, who also thinks the number is an unsustainable blip, possibly the result of gift cards:

…total retail sales were pushed higher by large increases in sales of apparel, electronics, and merchandise purchased on-line, as well as a large gain in restaurant sales. To some extent, higher sales in these categories could reflect redemption of gift cards given over the holiday season, despite anecdotal reports that gift card sales were very weak this season. Recall that gift card sales are booked at redemption, as opposed to when the cards were actually purchased, so the January sales data in actuality mark the final chapter on a holiday sales season that was not as bleak as it initially looked, which of course still leaves it as lacking. If indeed gift card redemptions were a key driver of January sales, this suggests an nswer to the question we posed above as to the sustainability of January sales.