Retail Sales were weaker than expected in January. Total retail sales rose 0.3%, below the 0.5% consensus expectation, and are up 7.8% from a year ago. December was revised down from 0.6% growth to 0.5% growth.
The Retail Sales report covers far more than just the shopping malls and is a very broad-based measure of consumer spending. Since consumer spending makes up 71% of the economy, it is a very important number. That overstates things a bit since retail sales are mostly about the sale of goods, not services, and services make up two-thirds of what consumers spend. Still, it is a pretty important thing to watch.
Auto sales were a bit of a help to overall retail sales in January, rising 0.5% on the month, that is after rising 1.5% in December. On a year-over-year basis they were up 15.7%. Excluding autos, retail sales rose 0.3%, matching the December rise, but only after the December number was revised down from a 0.5% gain.
Year over year, sales are up 6.2%. The consensus was looking for a 0.5% rise on the month, excluding autos.
This report has to be seen as a disappointment. Some of the weakness might have been weather-related, but, then again, the consensus forecasters all had access to the Weather Channel. The fact that it was a harsher than normal January was hardly a surprise. The year-over-year numbers are still pretty robust, so I would not want to overstate the weakness, but it was still a disappointment.
The growth was very uneven. The report tracks 13 major categories of stores, of which eight were up and only five down on the month. Year over year, twelve of the types of stores are showing increases, ranging from 0.6% (furniture stores) to 14.2% for auto dealers like CarMax (NYSE: KMX). The auto numbers also include auto parts stores like AutoZone (NYSE: AZO).
Electronics & Appliances
The only category of store showing a decline were the Electronics and Appliance stores, where sales were down 0.3% from a year ago. The retail sales data is adjusted for things like the season and the number of shopping days, but not for price changes. Electronics is one area where prices routinely fall.
Excluding the car lots, the highest year over year growth (13.5%) was in the non-store retailers, the category that includes the likes of Amazon.com (Nasdaq: AMZN). Again, the numbers are adjusted for things like the number of selling days in the month but not for prices, and thus give more of a picture of what is happening with nominal GDP than real GDP.
The lack of adjustment for price changes means that sometimes increases really are not good news. Most notably the case of gas stations. Their sales surged 1.4% on the month, and are up 12.0% from a year ago. The increase in January was on top of a increase of 1.8% in December. Clearly that is mostly a function of higher gasoline prices than it is a sudden surge in the consumption 44 oz fountain soft drinks and hot dogs off the rollers.
The price of oil has recently fallen back a bit as the situation in Egypt has stabilized, but so far that has not really filtered down to the prices at the pump. I suspect that the rate of increase will moderate in the February report.
Grocery store sales rose 1.3% in January, but that was after a 0.7% decline in December. That could be a bit of an indication of food price inflation. Certainly food commodity prices are way up, but raw commodities make up a pretty small part of the nation's shopping cart. The price of wheat is a very small part of the cost of a loaf of bread, for example.
Relative to last year, sales are up 4.3%. Food price inflation has not been a big long-term problem, at least here in the U.S., but it does seem to be picking up and might be more of a problem looking forward. In other parts of the world, higher food prices are a serious problem, and many analysts have pointed to higher food costs as one of the key sparks to the unrest in Tunisia and Egypt (which does seem to be spreading to other parts of Northern Africa and the Middle East).
Drug stores like Walgreen's (NYSE: WAG) also had a pretty good month with sales up 0.5%, but that is down from a rise of 0.7% rise in December, and up 6.4% year over year.
The more discretionary types of stores were mostly on the soft side. Sales at Furniture stores fell by 0.3%, after showing no increase in October. They are up just 0.9% year over year. Historically, one of the biggest catalysts for buying new furniture has been when people move to a new house. With sales of both new and used homes in the doldrums this has meant lower sales for furniture stores. Also, a new couch has to be one of the easiest purchases to defer if a consumer is not confident about their future or does not have cash available.
Sales at Electronics and Appliance stores such as Best Buy (NYSE: BBY) rose by 0.3% on the month after having fallen 0.9% in December. As I noted above, it is the only category of stores where sales were below year-ago levels.
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