A Disappointing Retail Sales Report

For the Pollyannas like me who see a second half rebound today’s retail sales number was a splash of cold water. It’s being reported that retail sales for March were down 1.1% over February and down 10.7% from last March. 

Taking some of the pain out of the numbers was the news that January sales were revised upward from a 1.8% increase to a 1.9% increase and February was revises to a 0.3% increase versus a previously reported drop of 0.3%.

From Jake at EconompicData.com, here is a breakdown of the categories.

From the WSJ Real Time Economics blog, here are a couple of economists’ reactions.

  • Weaker than expected report although some of the downside surprise in March was offset by upward revisions to Jan & Feb. Most importantly, it seems clear that the retail sales data has been impacted by inadequate seasonal adjustment over the past few months. So, much of the slippage in March should probably be viewed as an offset to the surprising gains seen in Jan & Feb… From a broader standpoint, the consumer is under severe pressure tied to a weakening labor market, a powerfully negative wealth effect and tight credit conditions. These forces should more than offset the support associated with the low level of energy prices, a pick-up in tax refunds during the current filing system. Moreover, we suspect the tax stimulus that will start to show up in the next month or so is too small to have any noticeable near term impact (less than $20 bil over the balance of the year) and it will take some time before the impact of heavy mortgage refi activity will flow thru to household spending. Thus, we look for consumer spending to remain quite weak into the second half of 2009. –David Greenlaw & Ted Wieseman, Morgan Stanley
  • Even after taking the March slump into account, it is unquestionable that consumer spending data in Q1 taken as a whole was decidedly better than the abysmal results in the six or so months preceding the span. Our feeling is that some of this is related to difficulty seasonally adjusting for activity in the winter that followed pronounced contra-seasonal weakness preceding it (although a late Easter likely weighed on the March results). Another factor aiding consumer spending is that largely because of terrible economic conditions in 2008, tax refunds in Q1 were $24B above a year-earlier. Even if only a small portion of this found its way into the spending stream, once it is annualized in GDP terms it likely goes a long way towards explaining the better consumer spending performance in Q1 and also points to the likelihood that it was just a temporary move. –Joshua Shapiro, MFR Inc.
Anyway you want to cut the date, it isn’t that encouraging. 
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