US retail sales….not so pretty a picture

Some concerns with the April data:

  • April is seasonally a weak month and any transfer of consumption capacity to it would skew the monthly data in favour of a higher seasonally adjusted change.
  • It is not the rebound in the data that is important but the strength of the trend.  The pattern over the last 3 years is for a weakening in the strength of the rebound and retail sales growth.
  • Inventories are high relative to sales but they have likely never been higher once we factor in the growth rate of inventories relative to sales.

And the supporting graphics:

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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.

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More importantly is whether the rebound in adjusted consumption represents a continuation of a weakening trend or not?  This is the real question!

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Also, retail inventories relative to sales remain at relatively high levels:

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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.

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