Retail Sales

Much is being made of the reported gains in same store sales by major retailers.

But it may be best to take these reports with a grain of salt.

Until late last year price increases in the retail sector were minimal
and the reported retail sales increases reflected real gains.

Through year end the Y/Y deflator for retail sales rose less than 1%.

But late last year price increases accelerated sharply

In the fourth quarter the retail deflator rose at a 5.5% annual rate and in January and
February it rose at about an 8% rate. The March data has not been reported yet,
but until new information is reported it probably would be best to assume the January
and February experience was repeated.

Also note that in March auto sales actually fell from 13.4 to 13.1 million(SAAR) —
a 2.2% drop.

In January the deflator for GAFO– department store type goods — sales rose at a 4.45%
annual rate, the largest jump in over a decade. No wonder Wal Mart is warning about higher inflation.