George S. May Business Blog

Retail Sales are up and up big! Is the recession over?

In looking at the raw numbers for Retail sales in the month of August, it would be pretty easy to be convinced that we were in a full blown recovery. Month over month for August, it was up +2.7% versus consensus expectations of a 1.9% increase.

Thank You Cash for Clunkers!

Yeah, vehicle sales had a 10.6% jump thanks to the $3 billion dollar, government sponsored, cash for Cash-for-Clunkers program, as well as a slate of state sales tax holidays.

Now, let’s look without the Cash for Clunkers Glasses on.

Remove auto sales and…drum roll please… sales were up 0.7%.

Sigh…
Well, let’s look at the bight side, the numbers are still better than consensus expectations of +0.4%. In fact, August was the best month since February 09, and ends a five-month string of flat-to-negative results.

David Rosenberg of Gluskin Sheff got a bit more specific when it came to the winners and losers.

“The sectors posting good results were …

• Clothing, which we’ve highlighted before, is on a firming trend – up 2.3% Mom and gaining in three of the past four months.
• Electronics did well too – rising 1.1% but that followed a 1.0% decline in July. No evidence of a positive pattern here.
• Food/beverage stores had their best sales month, up 0.5%, since January.
• Drug stores also had their best month since March – up 0.4% last month and up in three of the past four months.
• Sports/music/book stores had their best tally since March 2007 with a huge 2.3% run-up last month.

• One of the big upside surprises was in general merchandise (mostly department stores) which posted a 1.6% MoM surge – the best performance since March 2007 too.

The laggards in the report included….

• Restaurants – up 0.3% and this followed two months of decline. The trend in restaurant sales is clearly down.
• E-tailing was flat – web-based sales have been stagnant or down now for six of the past seven months.
• The real weak parts of the report were in the housing-related areas, even though home sales have clearly picked up off the floor.
• Furniture stores saw a 0.2% sales loss – sales have been down now for six months running.

• Building materials posted a huge 1.2% decline, the third large falloff in a row.”

In looking ahead, September seems to be starting off well. Year over year trends are negative 1.9%, but the monthly changes are positive.

It must be said, discount stores have been the leaders. So what does that say? People are still pinching pennies and spending remains restrained in terms of discretionary purchases.

Now for the real question, how bad would it be had we not been injected with government stimulus, tax holidays and bailouts.

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