With the recent CPI data I have updated my retail sales graphics. Takeaways?
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Sales growth is slowing but no recessionary conditions;
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Weak historical growth profile held up by motor vehicles and parts sales;
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Motor vehicle and parts sales held up by consumer credit growth;
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Points 2 and 3 slowing;
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While personal disposable income has exceeded retail sales growth of late, cumulative historic relationship remains weak;
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Consumer credit growth to income relationships strained;
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Population growth weak in historical context;
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Current cycle lacking in typical wage growth spike
And the graphs:
Sales growth is slowing, but no “real” sign of recessionary conditions:
Annual growth rates are buoyed by weak data a year ago and while by no means strong compared to prior cycles are not, at this metric, exhibiting the kind of weakness you would ordinarily be worried about:
But as I have been pointing out for some time, retail sales strength has been supported by motor vehicles and parts sales, itself fuelled by consumer credit growth:
But motor vehicle and parts sales have been slowing over the last six months:
And consumer credit as a % of personal disposable income keeps on rising:
And relative to income growth is currently at all time highs:
And yes, of late disposable income has moved ahead of retail sales growth and many question why consumers are not spending savings from commodity price declines:
But we can see that cumulative growth in personal disposable income remains well below pre crisis levels: cumulative increase in food sales less cumulate increase in personal disposable income is negative:
And of course, of late, consumer credit growth has taken a step back:
Population growth likewise:
And we have lacked a spike in wage growth: