Some concerns with the April data:
And the supporting graphics:
Seasonally adjusted retail sales grew at the fastest rate for some time. Eye popping almost! But April is typically a weak month and we have had relative weakness during Q1 2016.
The following chart shows the actual, unadjusted, expenditure on a monthly basis for the above seasonally adjusted chart. If consumption capacity had been transferred to April from prior months its adjusted impact would have been skewed.
More importantly is whether the rebound in adjusted consumption represents a continuation of a weakening trend or not? This is the real question!
Also, retail inventories relative to sales remain at relatively high levels:
The highest level since 2004/2005. However, once we realise that 2004/2005 inventory levels accompanied higher retail sales growth relative to inventory growth we can see that the inventory/sales dynamic is weaker still.
It is a trend I have been following for some time….global growth is slowing down at a time in the cycle when you would usually expect to see inflation and supply bottlenecks. If it were not for the very high levels of asset focussed money supply growth over the last few decades and the build up of debt and asset values (dependent on this growth), I would not be ringing any bells. But the divergence between what asset values need growth to be and what growth is turning out to be is the problem.
US retail sales (I am still waiting for the CPI update which will allow for a better assessment of retail volumes) took a further hit in March:
The biggest contributor to the recent slide has been motor vehicles and parts sales. This component has also been the biggest contributor to retail sales growth post the 2008/2009 recession and a large contributor to significant increases in consumer credit debt loads:
The inventory picture has also darkened with the longer term inventory to sales relationship showing an unusual divergence:
Last month’s analysis
With the recent CPI data I have updated my retail sales graphics. Takeaways?
Sales growth is slowing but no recessionary conditions;
Weak historical growth profile held up by motor vehicles and parts sales;
Motor vehicle and parts sales held up by consumer credit growth;
Points 2 and 3 slowing;
While personal disposable income has exceeded retail sales growth of late, cumulative historic relationship remains weak;
Consumer credit growth to income relationships strained;
Population growth weak in historical context;
Current cycle lacking in typical wage growth spike
And the graphs:
Nominal retail sales data is typical of a recessionary environment, but much of this is due to declining gas prices. Manufacturing output and new order data is also typical of recessionary conditions. Motor vehicles and parts sales/new orders/output are still strong data points albeit showing signs of weakening, especially in the auto components. Cycle to cycle we see retail sales, orders and output all failing to establish a clear positive post crisis fundamental growth trajectory. That said there does not appear to any abrupt collapse in the data which is not necessarily a positive.
As world growth appears to be slowing an awful lot is riding on US retail sales, unfortunately.
Retail sales growth has weakened since the post winter bounce earlier in 2014. Excluding motor vehicles and parts the picture is weaker still. The only bright spot is falling inflation, but only on a shorter term view. Retail and food sales per capita adjusted for CPI are not much higher than they were in 1999.
US retail sales if we move outside the month to month volatility and look at smoothed data (which focuses on capacity as opposed to volatility) and adjust for inflation and population growth is looking weak:
If we just look at nominal and monthly data it looks as if retail sales are recovering strongly as of the June data: