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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 Still Sluggish in January; Online Vendors Hurt by Import Shortage?

Headline retail sales rose 0.3% in January, though that was mostly offset by a -0.2% revision to the December estimate, leaving the January sales estimate barely above what was announced for December a month ago. Our preferred "control" sales measure, sales excluding vehicles, gasoline and building materials, also rose 0.3%, but with "only" a -0.1% revision.

The January sales gains are a bit better than what we have seen over the previous four months, but they still continue a trend of softer sales growth since August. As we have remarked in previous posts, a good bit of this softness can be linked to sharply reduced imports of consumer goods from China over that same time span. That is, just as retail sales have been sluggish since August, total imports have plunged since August, and those general declines show up prominently in imports of consumer goods and in imports from China.

We can’t directly prove any link between these phenomena. However, when retail sales of merchandise soften at exactly the same time that imports of merchandise from a major supplier plunge, one has to think that a link is likely.

A previous caution we had in pushing this story was that we had not heard retailers complaining of a shortage of merchandise holding back demand. However, another piece of the puzzle was possibly divulged within today’s sales report. That is, a good bit of the softness in total sales now appears due to a sudden stall in online sales of merchandise ... also since August.

Through August, sales at "nonstore" (online) retailers had been rising at a 16% annualized rate. In the five months since then, sales at nonstore retailers have fallen at a -2.5% annualized rate. Also, online retailers tend to be less high profile than traditional, brick-and-mortar retailers, and so they would seem to be less likely to comment on a shortage of merchandise.

Admittedly, this is all speculative. However, when one sees sudden swings in the data with no fundamental explanation, it is hard not to look at factors such as we have described. Consumer incomes are growing nicely. Consumer spending on services continues to grow steadily. It is solely in consumer spending on merchandise where the recent softness has shown up, and there appears to be an import-related rationale for this.

In the foreign trade data for December, we began to see some rebound in imports. Our guess is that this will begin to show up in the retail sales numbers next month. Certainly, we do not expect the sluggishness in retail sales to continue, any more than did a similar slowing that occurred exactly one year ago.

Retail Sales Trend
Retail Sales Trend
Source: Census Bureau. As of 31 Jan 20. "Control" retail sales is total sales less vehicle dealers, service stations and building material stores.

Michael Bazdarich

Product Specialist/Economist

Mike brings more than 45 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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