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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 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 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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