Are Retail Sales Really That Strong?

First, an apology for not blogging for a bit…I’ve been caught up in other things. But now I’m back in the saddle again…

I’ve been eyeing the retail sales numbers for a while now, and worrying about their accuracy. Here’s what puzzles me:

According to the BEA (based on Census data), real retail sales, except motor vehicles, was actually up in the first quarter. This is one important reason why real GDP has continued to rise, and why many economists are saying we are not in a recession.

The question is: Does this behavior of real retail trade make sense?

Here’s what I saw when I looked beneath the numbers a bit. This is the reported growth rate of sales in the first quarter, in real terms, for some key sectors of retail trade.

First quarter 2008
Growth rate of real retail sales
at annual rate
Electronics and Appliance stores 13.3%
Food and beverage stores 0.1%
Clothing and accessories stores 4.2%
General merchandise stores 4.7%
Health and personal care stores 5.0%
Gasoline stations 3.7%
Sporting goods stores 2.0%
Books and periodical stores 3.3%

First, a caveat. This data is below the level which the BEA considers publishable, so any particular number may not stand up.

But taken together, they present an odd picture. How could it be that real gasoline sales are up in the first quarter, considering the soaring price? That would mean more gas was being pumped.

How could it be that real clothing sales are up in the first quarter? That would mean more dresses, shoes, and jewelry were being taken off the rack and leaving the stores.

And, especially, how could it be that real book sales are up? Taken literally, that would mean more books and periodicals are being sold, which would be wonderful if it was true.

Now, there are two possibilities. Either the seasonal adjustment factors are weird, which would mean that we will give back part of the strength in the second quarter. Or something has changed about the economy which is throwing off the retail sales data collection.

More tomorrow.