US Retail Sales Retreating Again

The bounce in US Retail sales we saw in January is starting to look more and more like just that - a bounce, not a fundamental return of consumer spending. Since the consumer is responsible for over 70% of the economy, clearly this is significant. Here is the key section of the report:

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for April, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $337.7 billion, a decrease of 0.4 percent (±0.5%) from the previous month and 10.1 percent (±0.7%) below April 2008.

Total sales for the February through April 2009 period were down 9.2 percent (±0.5%) from the same period a year ago. The February to March 2009 percent change was revised from -1.2 percent (±0.5%) to -1.3 percent (±0.3%).

Retail trade sales were down 0.4 percent (±0.7%) from March 2009 and 11.4 percent (±0.7%) below last year. Gasoline station sales were down 36.4 percent (±1.5%) from April 2008 and motor vehicle and parts dealers sales were down 20.7 percent (±2.3%) from last year.

The revision to the March numbers imply that the revisions to the first quarter GDP report will be negative. The trade numbers yesterday implied a downward revision as well.

The chart below (from http://www.calculatedriskblog.com/) shows that the year-over-year change in retail sales, on both a nominal and real basis, has almost returned to its December lows. Many of the retailers have staged very spectacular rallies off their lows, and they sure look far overdone to me.

The mid-range retailers look most vulnerable to me. I would be very cautious with names like Macy’s (M) and J.C. Penney (JCP) at this point. Low-end retailers, such as Wal-Mart (WMT) and Family Dollar (FDO) will hold up better as people trade down.

The headwinds that the the retail sector faces are strong, and they are not a temporary gust. Aggregate personal income is falling as more people lose their jobs, and those that are still working are trying to pay down debt and build up savings. This will be a long-term thing - lasting years, not months.

This report is not fertilizer for the green shoots…

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