Why Today’s Retail Sales Numbers are Virtually Meaningless

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So, another set of monthly sales numbers came out this morning…and here we go again with the every-30-day hysteria they produce.

The big headline everyone will fixate on is that retail sales declined 0.3% for May, the first drop in five months. This has allowed businesspeople – professionals, empty suits and innocent bystanders alike – to rant and rave about the economy and the end of spending as we know it.

And while the overall news is not terrific, a closer look at the numbers shows maybe things aren’t quite as bad as they seem. Yes, it’s a decline and it’s real. And yes, it’s more than the so-called experts forecast, which was a 0.1% decline. So, it’s not exactly a ringing endorsement of the economy.

But these retail sales numbers include one huge outlier: automobile and vehicle sales. Now, it doesn’t take a math genius to figure out that at an average price of about $47,000 the sale of an automobile significantly outweighs the purchase of a new top at Zara or even a flat-panel TV on Amazon. So, when auto and auto parts sales dropped 4% for the month, that really skews the numbers, the proverbial giant thumb on the scale.

Then there’s gas prices, which while a consumer spend, are not what those in the general retail business consider a purchase. They were up 4% for the month (bet you thought it was more the last time you filled up) so they are messing with these numbers too.

Take out car sales and gas purchases and it turns out the rest of what is measured in retail sales was actually up 0.1%. Again, not a stellar result but it’s in black ink, not red. True, much of this was driven by food, restaurants and bars but some categories were actually at least as much as the overall number: Sporting goods, books and hobbies, up 0.4%; home and garden centers, up 0.2%; and both clothing and general stores (whatever they are), up 0.1%, the same as the total.

So, when you dig down a little deeper, the picture does change. Add in inflation, which is essentially out of control despite what Janet Yellen says, and it becomes really difficult to get a true read on an apples-to-apples comparison…that is how many things consumers actually bought last month.

Remember retail comp store sales? Some companies still put them out but they have become increasingly irrelevant given e-commerce buying. The same thing is starting to happen with these overall monthly retail sales numbers, at least the top line results.

Don’t get fooled by the headlines. As in most things in life, the details below the fold are much more important.

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