skip navigation
Blog

Stay up to date on timely topics and market events. Subscribe to our Blog now.

ECONOMY
16 September 2021

A Patchwork Pattern Yields Modest Overall Sales Gains in August

By Michael J. Bazdarich, PhD

Stay up to date on timely topics and market events. Subscribe to our Blog now.

Headline retail sales rose by 0.7% in August, with the July sales estimate essentially unrevised. Excluding sales of vehicle dealers, building material stores, gas stations and restaurants, so-called “control” sales rose 2.5%, though with a -0.7% revision to July.

In pre-Covid days, these gains would have been impressive, and there are likely commentators in New York and Washington who will lionize these data. However, coming after four months of flat-to-declining sales prints, the August gains don’t really move the needle in the three lines displayed in the chart.

Furthermore, the sales gains were narrowly confined to a few store types, and for most of those, seasonal factors look to have been in play. That is, before seasonal adjustment, those store types actually showed relatively large sales declines that were then seasonally adjusted into gains.

Exhibit 1: Retail Sales Trends
Explore Retail Sales Trends
Source: Census Bureau. As of 31 Aug 21. Select the image to expand the view.

In other words, actual sales at those stores did not decline as much in August as usually is the case. This is not to knock the government’s seasonal adjustment techniques. Rather, the point is that shoppers did not exactly “clog the aisles” in August, even for the stores where substantial gains were reported.

Leading the reported August sales gains were nonstore (online) (+5.3%), furniture (+3.7%) and general merchandise retailers (department stores) (+3.5%), with more modest gains at groceries (+1.9%), miscellaneous retailers (+1.4%) and building material stores (+0.9%). Among these, sales declined prior to seasonal adjustment at nonstore retailers, groceries and miscellaneous retailers.

Meanwhile, sizable sales declines were reported for sales at motor vehicle dealers (-3.6%), electronics stores (-3.1%) and sporting goods stores (-2.7%). We’ll note that electronics and sporting goods stores eked out very small gains in adjusted data, which then were adjusted into declines. In other words, these stores did not enjoy the substantial sales gains that usually occur in August.

All told, the August sales report was quite a mixed bag, hence the “patchwork” description in the title. Given the amount of measurement error that always underlies these data in any given month and given the reality of downward-trending sales over the previous four months, our conclusion is that the August report does not change the narrative concerning consumer spending.

After a binge in the early months of the year, consumer spending on merchandise has generally been retreating back toward the growth trends that were in place prior to the onset of pandemic, this despite the massive amounts of stimulus that the federal government has paid out.

If the data could put together four to six months of gains such as those reported for August, that would change the picture. Maybe August marks a start to such a change, but given the vagaries detailed here, we are inclined to think otherwise.

© Western Asset Management Company, LLC 2024. The information contained in these materials ("the materials") is intended for the exclusive use of the designated recipient ("the recipient"). This information is proprietary and confidential and may contain commercially sensitive information, and may not be copied, reproduced or republished, in whole or in part, without the prior written consent of Western Asset Management Company ("Western Asset").
Past performance does not predict future returns. These materials should not be deemed to be a prediction or projection of future performance. These materials are intended for investment professionals including professional clients, eligible counterparties, and qualified investors only.
These materials have been produced for illustrative and informational purposes only. These materials contain Western Asset's opinions and beliefs as of the date designated on the materials; these views are subject to change and may not reflect real-time market developments and investment views.
Third party data may be used throughout the materials, and this data is believed to be accurate to the best of Western Asset's knowledge at the time of publication, but cannot be guaranteed. These materials may also contain strategy or product awards or rankings from independent third parties or industry publications which are based on unbiased quantitative and/or qualitative information determined independently by each third party or publication. In some cases, Western Asset may subscribe to these third party's standard industry services or publications. These standard subscriptions and services are available to all asset managers and do not influence rankings or awards in any way.
Investment strategies or products discussed herein may involve a high degree of risk, including the loss of some or all capital. Investments in any products or strategies described in these materials may be volatile, and investors should have the financial ability and willingness to accept such risks.
Unless otherwise noted, investment performance contained in these materials is reflective of a strategy composite. All other strategy data and information included in these materials reflects a representative portfolio which is an account in the composite that Western Asset believes most closely reflects the current portfolio management style of the strategy. Performance is not a consideration in the selection of the representative portfolio. The characteristics of the representative portfolio shown may differ from other accounts in the composite. Information regarding the representative portfolio and the other accounts in the composite are available upon request. Statements in these materials should not be considered investment advice. References, either general or specific, to securities and/or issuers in the materials are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendation to purchase or sell such securities. Employees and/or clients of Western Asset may have a position in the securities or issuers mentioned.
These materials are not intended to provide, and should not be relied on for, accounting, legal, tax, investment or other advice. The recipient should consult its own counsel, accountant, investment, tax, and any other advisers for this advice, including economic risks and merits, related to making an investment with Western Asset. The recipient is responsible for observing the applicable laws and regulations of their country of residence.
Founded in 1971, Western Asset Management Company is a global fixed-income investment manager with offices in Pasadena, New York, London, Singapore, Tokyo, Melbourne, São Paulo, Hong Kong, and Zürich. Western Asset is a wholly owned subsidiary of Franklin Resources, Inc. but operates autonomously. Western Asset is comprised of six legal entities across the globe, each with distinct regional registrations: Western Asset Management Company, LLC, a registered Investment Adviser with the Securities and Exchange Commission; Western Asset Management Company Distribuidora de Títulos e Valores Mobiliários Limitada is authorized and regulated by Comissão de Valores Mobiliários and Brazilian Central Bank; Western Asset Management Company Pty Ltd ABN 41 117 767 923 is the holder of the Australian Financial Services License 303160; Western Asset Management Company Pte. Ltd. Co. Reg. No. 200007692R is a holder of a Capital Markets Services License for fund management and regulated by the Monetary Authority of Singapore; Western Asset Management Company Ltd, a registered Financial Instruments Business Operator and regulated by the Financial Services Agency of Japan; and Western Asset Management Company Limited is authorised and regulated by the Financial Conduct Authority ("FCA") (FRN 145930). This communication is intended for distribution to Professional Clients only if deemed to be a financial promotion in the UK as defined by the FCA. This communication may also be intended for certain EEA countries where Western Asset has been granted permission to do so. For the current list of the approved EEA countries please contact Western Asset at +44 (0)20 7422 3000.