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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 Rorschach in Today's Data

Retail sales rose by 0.6% in March, with a slight downward revision to February's data. A good bit of that apparently strong headline gain came from motor vehicles, which have been especially choppy lately. The 2% March gain in vehicle sales came off of four straight months of declines and leaves vehicle sales levels little changed from the flat trend of the past 16 months.

Our control sales measure excludes car dealers—as well as building materials stores and service stations—thus providing a better measure of "underlying" sales growth. It showed a gain of 0.38% in March, but with a -0.13% revision to February. On net, control sales in March were up 0.26% from what was previously announced for February.

The accompanying chart tells the story. Today's data break the string of declining sales over the previous three months. However, they do little more than continue sales at the same underlying growth pace as we have seen for the past three years. This conclusion is echoed by the six-month growth rate for control sales also seen in the chart, which is likewise now back to its levels of the past three years.

The last few months' retail sales data provide a good Rorschach test of one's views. When retail sales showed explosive growth last November, the consensus view was quick to label that as the first evidence of the consumer upsurge they expected. For the last three months, those supporting this view have been groping for reasons why spending was so "anomalously" slow. Early indications are that they are touting today's "strong" gains as vindication of their expectations.

My own take was that the November gains were a one-time Christmas binge, so that the three months' declines seen through February were merely a return to trend. Today's data merely show a continuation of that pre-November trend growth. Why lock on a one-month gain that has since been reversed, and why lionize a March gain that is distinctly mediocre? Ask them.

On net, todays data do not move the needle for economic growth. I look for 1Q18 GDP to come in at about 1.5%, with real final demand growing less than 1%. We’ll see how the actual estimates turn out in our next installment on April 27.

Retail Sales Trends
Retail Sales Trends
Source: Census Bureau, as of 31 Mar 18. "Control" retail sales is total sales less vehicle dealers, service stations and building materials stores.

Michael Bazdarich

Product Specialist/Economist

Mike brings more than 44 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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