Reclaiming Common Sense

 The Retail Renaissance Can Soar Higher.

Contrary to those who say that were are in a Retail Ice Age, the data indicates that we are in a Retail Renaissance.  The real, non-seasonally adjusted, retail sales growth that we have seen since October 2015 has been undervalued in the seasonally adjusted GDP Personal Consumption Expenditures Data. This column has written numerous articles regarding the Retail Renaissance, the most recent being "Record April Retail Sales." The data indicates that we are on track for a $6 trillion dollar retail sales year. This would be the first $6 trillion dollar retail sales year. The Great Recession was a Jobs Recession, a Wage Recession, a housing recession, and a retail recession, rolled into one Gross Domestic Product Recession. The recovery has been an incomplete recovery with regard to all sectors of retail and with regard to the existing housing sales level as well as the new construction levels and new construct sales level. What can we expect from the May MARTS Retail Report?

Will the rolling year growth rate break through 5%? The rolling year growth rate, the combined sales during the prior twelve months, has eclipsed 5% for years on end, most recently between October 2010 and January 2013. We have been growing at a rate greater than 4% since July 2017. It is not a natter of if we will hit 5% this year, it is a matter of which month it will be this year.

Contrary to what you are hearing elsewhere, the non-seasonally adjusted retail sales data is better this year than last year. Annual sales total sales, non-seasonally adjusted, has improved since 2010. The one segment of the retail economy that has not recovered to its pre-recession level, as of the April report, is the electronics and appliance sector. Current Year total retail sales  are up 4.71% ahead of where they were as of April 2017. The situation where the current year total sales is growing faster than the rolling year, or trailing year, sales is growing means that the economy is expanding. Notice that we were over 5% quarter to quarter growth during June of 2015. We could repeat that feat during the second quarter of 2018.

The Headline Seasonally Adjusted Retail Sales level has been declining since June 2015.  Remember that the seasonal factors that are used to convert the non-seasonally adjusted (NSA) retail sales data to the seasonally adjusted (SA) retail sales change category to category, month to month, season to season, and year to year.  Also remember that we had ten consecutive months of deflation during 2015. That "gasoline stimulus" was deflation. The gasoline stimulus was a myth. Seasonally adjusted retail sales started slowing before the 2016 Presidential election.

We can expect month to month growth in all sectors. The Monthly and Annual Retail Trade Survey data indicates that the total monthly retail sales number should increase by 5% to 8% this month from the April 2018 level. The biggest gains should be seen in the Motor Vehicle Parts and Sales (MVP) sector, the Building Material and Garden Equipment (BMGE) sector, the Miscellaneous Sales (MISC) sector, the Home furniture and Furnishings (FHF) Sector and the Electronics and Appliances Sector.

We might see May to May contraction in sales in two sectors. The May to May data indicates that we should see same month gains in all sectors other than the Sporting Goods, Hobby, Books and Music (SGHBM) sector and the Electronics and Appliances sector. The largest growth here may be non-store retail, gasoline, BMGE, and FHF. The BMGE and FHF sectors make sense because we are seeing improvement in the new and existing home sales markets. The growth in non-store retail comes at the expense of brick and mortar stores that sell electronics and appliances, SGHBM products, and clothing products.

Overall, the economy is humming. Retail sales are up more than the rate of inflation. That should happen again this month. Wages are rising. full-time jobs are rising. People have more money to spend and more time to spend the money. Gasoline prices were higher this year than last year so gasoline sales should surge. We have spent considerable money during the month of May on gasoline during prior years. It will be interesting to watch the revisions and the seasonally adjusted data. Forget the Ice Age talk. This is a Retail Renaissance.$6 trillion in annual total retail sales is within reach.

It's the economy.