December real retail sales: the worst in almost two years
December real retail sales: the worst in almost two years
– by New Deal democrat
Real retail sales, one of my favorite indicators, was updated this morning for December, and it was significant.
It’s not just that retail sales declined -1.1% for the month both in nominal and real terms; it’s that both October and November were revised downward by -0.2% and -0.4% respectively, so the ultimate number is considerably worse than would otherwise have been expected.
How so? First, here are real retail sales in absolute terms for the past 25+ years:
Note that in the year before both the 2001 and 2008 recessions, real retail sales went flat. As shown in the below close-up of the past two years, last month was the worst showing since February 2020, before the last pandemic stimulus was passed:
This shows up as the second month in a row of a negative YoY reading (which is pretty impressive in a negative sense, because December 2021 was *awful* due to the original Omicron COVID mega-wave) (I’ll come back to the red line showing the YoY% change in payrolls in a moment):
Here’s the longer term YoY view:
As I’ve noted many times, real retail sales going negative YoY, at least for more than one or two months, has been an excellent harbinger of incoming recession. In fact, the relationship goes back about 75 years. While I’ve discounted the negative numbers from spring 2021, as I wrote about yesterday, because of distortions due to comparisons with the spring 2021 stimulus months, there is no distortion in these negative readings. If they continue any further, that would be very strong evidence that a recession is close at hand.
Which returns us to the red line in the graph above. Remember that consumption leads jobs. If we omit the March-May months, we have 7 months since of absolute weakness in consumption growth, and decelerating jobs gains. This morning’s report is a potent warning that we should expect jobs growth to decelerate further, and perhaps sharply.
November real retail sales turn down, return to negative YoY, Angry Bear, angry bear blog
With retail demand dropping for the last quarter, just what is it that’s been driving up prices in the retail markets beyond simple greed and pricing power of the marketers. The Fed has been pulling the trigger on the interest rate hikes like a hired assassin trying to kill the economy with no idea whatsoever whether its actions would have any effect on prices. We have been witnessing one of the greatest professional failures in the history of finance and economics for the last half year and the MSM has barely twigged to what’s been going on beyond reporting “inflation.”