Economy & Policy

Retail sales: If you ignore cars and gas it’s not so bad

By Justin Fox | November 14, 2008 | +

I’m not saying you should ignore cars and gas, but I always love playing with the numbers in reports like this.

The headline is that retail sales were down 2.8% in October, the worst one month decline since this particular economic series was launched in 1992. That historical fact is not quite as ominous as it might sound, given that the last real consumer recession was in 1990-1991 (2001 was a business-led downturn in which consumers played only a peripheral role). But -2.8% is still pretty scary.

Except that the hardest-hit category by far, gasoline stations–down 12.7%–was down largely because gas prices were down. It wasn’t that consumers were cutting back. It’s that they were saving money. Take gas stations out of the equation and the retail spending decline is 1.5%. Take gas stations and cars (motor vehicle & parts dealers) out, and the decline is 0.5%. Then again, if you take all the stuff that went down out of the equation, retail sales were up. Which means precisely nothing at all.

For me at least, October was a month when the world sort of stood still. I didn’t buy much of anything but food. It’s the November-December-January numbers that are going to tell us whether we’re facing a consumer spending decline or a consumer spending collapse.

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  • bryanfromhouston

    Take foreclosures out of the market and I think we could have had a positive GDP number. I’m not sure of the utility of such fanciful exploits. But what I will tell you (like I informed Barbara), Michael Lewis just wrote the most entertaining article that I have ever read on why we are currently suffering.
    -
    http://www.portfolio.com/news-markets/national-news/portfolio/2008/11/11/The-End-of-Wall-Streets-Boom

  • sprizouse

    Yes but the fall in commodity prices didn’t increase spending. Imagine if oil had fallen to $50/barrel in June, wouldn’t you have expected a spike in retail spending across other sectors? The billions we saved in the fall of oil prices is money we didn’t spend elsewhere.

  • sprizouse

    Yes but the fall in commodity prices didn’t increase spending. Imagine if oil had fallen to $50/barrel in June, wouldn’t you have expected a spike in retail spending across other sectors? The billions we saved in the fall of oil prices is money we didn’t spend elsewhere.

  • curmudgeon57

    @Bryan: Most of what I know about high finance I learned from reading Lewis’ Liar’s Poker.

  • harryfox

    Here’s my anecdotal economic activity indicator: One of our UPS delivery people mentioned the other day that package volume is way down, and the local office will be laying off 21 people after the holidays.

  • tegwar

    @sprizouse: Or worse, the money ‘saved’ at the pump is the only thing that kept the shoes, meals, appliances etc moving at the rate that they did. And a decline of 0.5 or 1.5 or 2.8 (however it’s sliced) following September’s 1.3% drop (headline number) is only that much more difficult to achieve.

  • donthelibertariandemocrat

    Keep playing with the numbers, please. It’s important, and I need some, at least a few, reasons to explain why I’m on the optimistic side, except for inflation, believe it or not, going forward.

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