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July Retail Sales Disappoint

August 12, 2016

by Doug Short

The Census Bureau's Advance Retail Sales Report for July released this morning was rather disappointing. Headline sales came in flat month-over-month to one decimal, which conceals a a tiny 0.4% decline at two decimal places. The consensus was for 0.4%. Core sales (ex Autos) came in at -0.3% MoM. The consensus was for a 0.2% increase.

Here is the introduction from today's report:

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for July, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $457.7 billion, virtually unchanged (±0.5%)* from the previous month, and 2.3 percent (±0.7%) above July 2015. Total sales for the May 2016 through July 2016 period were up 2.5 percent (±0.5%) from the same period a year ago. The May 2016 to June 2016 percent change was revised from up 0.6 percent (±0.5%) to up 0.8 percent (±0.2%).

Retail trade sales were virtually unchanged (±0.5%)* from June 2016, and up 1.9 percent (±0.5%) from last year. Nonstore retailers were up 14.1 percent (±1.2%) from July 2015, while Health and Personal Care Stores were up 7.8 percent (±2.3%) from last year. [view full report]

The chart below is a log-scale snapshot of retail sales since the early 1990s. The two exponential regressions through the data help us to evaluate the long-term trend of this key economic indicator.

Retail Sales Trends

The year-over-year percent change provides another perspective on the historical trend. Here is the headline series.

Retail Sales YoY

Here is the year-over-year version of Core Retail Sales.

Core Retail Sales YoY

Retail Sales: "Control" Purchases

The next two charts illustrate retail sales "Control" purchases, which is an even more "Core" view of retail sales. This series excludes Motor Vehicles & Parts, Gasoline, Building Materials as well as Food Services & Drinking Places. The popular financial press typically ignores this series, but it a more consistent and reliable reading of the economy.

Control Sales Trends

Here is the same series year-over-year. Note that the current level is fractionally below the highlighted values at the start of the two recessions since the inception of this series in the early 1990s.

Control Sales YoY

For a better sense of the reduced volatility of the "Control" series, here is a YoY overlay with the headline retail sales.

Headline and Control YoY

Bottom Line: The July sales were a major disappointment against the strong numbers in June. Next week we'll take a close look at Real Retail Sales after the July Consumer Price Index is released on Tuesday.