By the Numbers

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

Sign up to receive an email as pertinent data are released.

Retail Sales Release Clarifies Consumer Spending Picture

As we see it, the best chance for faster US growth (and higher bond yields) in 2014 resides in a continuation of the strong growth in retail sales and housing starts seen at the end of 2013. If retail sales continue to grow at their 4Q13 pace and if homebuilding accelerates to levels consistent with the November and December housing start prints, then 3% or better real GDP growth would indeed be very likely. The problem is that there were suspicious elements to both of these upturns; 4Q13 retail sales growth was much faster than is consistent with accompanying growth rates in personal income and services consumption, and housing starts were dramatically higher than what was indicated by recent building permit and new-home sales levels.

So, today’s retail sales release provided an important look at how retailing started the year. (We’ll see about housing next week.) The accompanying chart shows levels and growth rates for the "core" retail sales measure we track most closely. As with the core jobs number analyzed last week, this sales measure abstracts from especially volatile retail sectors and also homes in on those retail sectors most reflective of consumer demand.

In looking at this chart, you might be asking, "Where is that 4Q13 retail surge he’s talking about?" The answer is that the Census Bureau has revised it away! Previous data had shown sales growth at an annualized rate of 7% or better in all three months of 4Q13 (dotted line in chart). Current, revised data now show essentially zero growth in November and December, followed by a 0.3% decline in January.

Surely, the January decline could be weather-induced. However, that does not diminish the fact that the 4Q13 retail surge now looks to be a one-month (October) wonder, much as we expected.

Retail Sales Trend
Retail sales trend chart
Source: Census Bureau. As of 31 Jan 14. “Core” retail sales is total sales less vehicle dealers, service stations and building material stores.

Michael Bazdarich

Product Specialist/Economist

Mike brings more than 40 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.

Sign up to receive an email as pertinent data are released.

© Western Asset Management Company 2017. This publication is the property of Western Asset Management Company and is intended for the sole use of its clients, consultants, and other intended recipients. It should not be forwarded to any other person. Contents herein should be treated as confidential and proprietary information. This material may not be reproduced or used in any form or medium without express written permission.
Past results are not indicative of future investment results. Investments are not guaranteed and you may lose money. This publication is for informational purposes only and reflects the current opinions of Western Asset Management. Information contained herein is believed to be accurate, but cannot be guaranteed. Opinions represented are not intended as an offer or solicitation with respect to the purchase or sale of any security and are subject to change without notice. Statements in this material should not be considered investment advice. Employees and/or clients of Western Asset Management may have a position in the securities mentioned. This publication has been prepared without taking into account your objectives, financial situation or needs. Before acting on this information, you should consider its appropriateness having regard to your objectives, financial situation or needs. It is your responsibility to be aware of and observe the applicable laws and regulations of your country of residence. Potential investors in emerging markets should be aware that investment in these markets can involve a higher degree of risk. Any forecast, projection or target is there to provide you with an indication only and is not guaranteed in any way.
Western Asset Management Company Distribuidora de Títulos e Valores Mobiliários Limitada is authorised and regulated by Comissão de Valores Mobiliários and Banco Central do Brasil. Western Asset Management Company Pty Ltd ABN 41 117 767 923 is the holder of the Australian Financial Services Licence 303160. Western Asset Management Company Pte. Ltd. Co. Reg. No. 200007692R is a holder of a Capital Markets Services Licence for fund management and regulated by the Monetary Authority of Singapore. Western Asset Management Company Ltd is a registered financial instruments dealer whose business is investment advisory or agency business, investment management, and Type II Financial Instruments Dealing business with the registration number KLFB (FID) No. 427, and members of JIAA (membership number 011-01319) and JITA. Western Asset Management Company Limited (“WAMCL”) is authorised and regulated by the Financial Conduct Authority (“FCA”). In the UK this communication is a financial promotion solely intended for professional clients as defined in the FCA Handbook and has been approved by WAMCL.