US Retail Sales: What does it really mean?

I’m fairly certain that I won’t be able to answer the question of, “What does US retail sales data really mean?” What I will attempt is to poke enough holes in the data and present the idea that US retail sales is not the definitive indicator that shows whether US consumers are buying or not.

The US Census Bureau announced on May 13, 2009 at 8:30AM EDT advance estimates of US retail and food services sales for April that are adjusted for seasonal variation, holiday and trading-day differences, but not for price changes. US retail and food services sales for April was US$337.7 billion, a decrease of 0.4 percent (+/-0.5%) from the previous month.

Let’s just look at this carefully. First, this is an advance estimate. It’s not final; just an estimate. Second, the estimate was not adjusted for price changes. There could have been large-enough price changes in retail and food services to have made an impact in overall sales. We will have to look at changes in CPI in April to figure that out. Third, the Census Bureau did not have sufficient statistical evidence to conclude that the actual change (0.4 percent decline) is different than zero. What that means is that April retail and food services sales could be in the range of -0.9 percent to +0.1 percent. That’s a range that can generate despair or happiness. But the world’s stock indexes got carried away anyway…

  • MSCI Asia Pacific Index dropped 2.6 percent to 95.64 as of 12:26 p.m. in Tokyo.
  • Japan’s Nikkei 225 Stock Average slumped 2.6 percent to 9,102.59.
  • Hong Kong’s Hang Seng Index sank 3.3 percent.
  • Australia’s S&P/ASX 200 Index slid 3.1 percent.
  • Standard & Poor’s 500 Index slid 2.7 percent…

If you look at Table 1 titled “Estimated Monthly Sales for Retail and Food Services, by Kind of Business” under the “Kind of Business” column heading is “Electronics & appliance stores”. That figure dropped from a preliminary estimated US$7,933 million in March to an advance estimate of US$7,184 million. That’s a 9 percent month-over-month decline. But note that this includes appliances and software that have almost nothing to do with LCD TVs, LCD monitors, notebook PCs and netbooks. I could imagine that many would not be purchasing or upgrading software applications let alone appliances unless you absolutely were forced to.

So what does all this data mean? Well it means that the US economy is not strong but it also means that the economy isn’t going down the toilet. It also means that the world’s indexes should not have overreact to this announcement.

Source: US Census Bureau

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