Earlier this week, we noted a deceptive rise in Retail Sales that was driven by price increases, not sales gains. Measured in Real terms, the inflation adjusted change in year over year sales actually dropped back to levels not seen since 2003.
The NYT’s Floyd Norris hammers this point home today:
"FACED with tightening credit and a slowing economy, America’s consumers are being forced to scale back their purchases, but high prices of necessities are keeping their overall purchases rising at a reasonably strong rate.
The retail sales report for January showed overall retail sales that were stronger than many economists had expected, and was well received by the stock market on Wednesday, the day it was released. In total, retail sales are running more than 4 percent over the level of a year ago, an increase that is above the overall inflation rate and much stronger than the sales were when the last recession began in early 2001.
But the overall change is misleading. One reason for its strength is that prices of necessities are up sharply over the past year, meaning that those items consume more and more of the household budget, leaving less for other things.
Over all, Americans are spending about 13 percent more on food and energy now than a year ago. The figures, as are all the figures shown in the charts accompanying this article, are based on three-month moving averages of seasonally adjusted figures, and compare this year with last year." (emphasis added)
Chart courtesy of NYT>
The actually rate of sales today is better than it was as we entered the 2001 recession. Much of that positive appearing difference, unfortunately, is inflation . . .
Retail Sales Show Inflation, Not Growth http://bigpicture.typepad.com/comments/2008/02/retail-sales-sh.html
Real Retail Sales Fall to 2003 Levels http://bigpicture.typepad.com/comments/2008/02/retail-sales-ga.html
Buy Less but Pay Lots More, and Get a Misleading Rise in Sales
NYT, February 16, 2008