There was a lot of cheering last month when retail sales rose by 0.2%.
That cheering mostly vanished into thin air today when January retail sales were revised to -0.4% and February retail sales came in at an anemic -0.1%.
Curiously Bloomberg Econoday said today’s report showed “respectable strength in February.”
February retail sales were inline with the Bloomberg Econoday consensus of -0.1%, but the real story was January revisions.
Consumer spending did not get off to a good start after all in 2016 as big downward revisions to January retail sales badly upstage respectable strength in February. January retail sales are now at minus 0.4 percent vs an initial gain of 0.2 percent. The two major sub-readings also show major downward revisions with ex-auto sales now down 0.4 percent vs an initial gain of 0.1 percent and ex-auto ex-gas sales now at minus 0.1 percent from plus 0.4 percent. The latest for this latter core rate is really the main positive in today’s report, up a solid 0.3 percent in February. Total sales for February are weak at minus 0.1 percent as is the ex-auto reading, also at minus 0.1 percent.
But even in the core readings, details are not great with strength so far this year mixed across nearly all categories. Still, year-on-year strength is evident in two key discretionary components which are vehicles, up 6.8 percent, and restaurants which are up 6.4 percent. Non-store retailers, benefiting from growth in ecommerce, are up 6.3 percent. Sporting goods, a smaller discretionary category, are up 6.7 percent. And building materials & garden equipment, in a sign of strength for residential investment, are up 12.2 percent. The downside includes electronics & appliances which are at minus 3.2 percent and department stores down 2.2 percent. The weakest of all of course are gasoline stations, down 15.6 percent on the year as low fuel prices depress dollar sales.
Given the skewing effect of gasoline, the ex-gas total is important to look at it and it’s up 0.2 percent in the month for very respectable yearly growth of 4.8 percent. This reading underscores the silver lining in the report, that retail sales, despite all the negatives, are moving in the right direction. January and February are the lowest sales months of the year, a fact that magnifies adjustment effects and can cause volatility in the readings. But that aside, consumer spending, despite high employment, is struggling to break out of a flat run that included a very soft holiday season.
It’s amusing watching Econoday attempt to spin every conceivable thing positive. Somehow, retail sales at -0.1% on top of a huge downward revision is allegedly indicative of “respectable strength in February”.
Reader Tim Wallace pinged me with this pertinent comment: “Down 0.1% in January means February retail sales were actually down 0.7% from January’s initially reported number.”
Mike “Mish” Shedlock