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By the Numbers

Featuring brief segments of economic analysis from our senior economist Michael Bazdarich, PhD.

The economic analysis we previously featured in By the Numbers is now available on the Western Asset Blog. This page will no longer be updated.

Retail Sales Inch Up In September, Still Up Strongly For the Year

Total retail sales declined by -0.3% in September, offset partially by a +0.2% revision to the August level. The declines were due mostly to a -1.0% drop in motor vehicle sales, with sales there affected by model-year changeover and labor strikes.

To allow for such typical volatility in the motor vehicle sector and elsewhere, we focus on a "control" sales measure that excludes sales at motor vehicle dealers, gas stations and building material stores. For that aggregate, sales rose +0.1% in September, with the August level revised up by +0.1%. Granted, even these gains are down sharply from the very heady sales growth rates of early summer.

Then again, the sales growth seen over March-July was unsustainably strong, so the slower sales growth recently was only to be expected. For the last six months, our control sales measure still shows a strong 6.4% annualized average rate of growth, and for the last 12 months, the average rate is an impressive 4.9%.

So, it is not accurate to characterize recent sales growth as "weak." More accurate is to say that it has come back to ground after a very strong run. Meanwhile, despite somewhat slower job growth this year, total wage incomes are still growing at a decent pace, close to 5%. This indicates to us that retail sales should grow at least at that pace in the months to come.

Again, we take the slower pace of the last two months as just an "averaging out" following overly strong gains in spring and summer. As you can see in the accompanying chart, retail sales have been jumpy for most of the past year, surging prior to Xmas 2018, slumping in the early month of 2019, surging again over March-July, then the coming to ground of the last two months.

Throughout these gyrations, anyone who has taken one or two months’ of data to indicate a change in trend up or down has been contradicted by subsequent months’ performance. We think any imputation of weakness to the recent data will turn out to be similarly rash/premature.

Retail Sales Trends
Retail Sales Trends
Source: Census Bureau. As of 30 Sep 19. "Control" retail sales is total sales less vehicle dealers, service stations and building materials stores.

Michael Bazdarich

Product Specialist/Economist

Mike brings more than 43 years of experience to his position. "By the Numbers" will address economic data releases that are pertinent to a broad range of investors.

Prior to joining the Firm in 2005, Mike ran his own consulting firm, MB Economics. He earned his PhD in Economics at the University of Chicago.

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