Economic Notes: Uneven Retail Rebound
8/17/2010
By Patrick O'Keefe, Director of Economic Research, J.H. Cohn
Retail sales
rose modestly in July, partially reversing declines in the two previous months. Compared to the cyclic low in March 2009, nominal sales are up 8.5%, but still below the pre-recession peak.
Retail’s incomplete recovery reflects an uneven performance among the sector’s components. More than three-quarters of the post-bottom gains occurred in just three categories: autos, gasoline, and e-tail (AGE). “E-tailing” consists of the Census data on electronic shopping and mail-order houses; data for July is estimated.
Over the course of the recession, these components each behaved differently when compared to the performance of the retail sector as a whole.
Auto sales fell sharply during the industry’s brush with bankruptcy, spiked on incentives, and have since stabilized. After plummeting in 2008, gasoline prices have been rising steadily -- up one-third since March 2009. The secular expansion of e-tail resumed after a brief interruption.
Retail sales bottomed at $298 billion in March 2009. At that time, about one-third of the total was attributable to the AGE categories (autos: 18.4%; gasoline: 9.4%; e-tail: 6.2%).
In July, sales were $25.4 billion higher, with more than three-quarters of the gain – more than twice their relative share of total sales – contributed by the AGE components (autos: 32.7%; gasoline: 29.1%; e-tail: 15.3%).
It is improbable that the AGE group can continue to post out-sized gains. To some extent, increased sales of gas stations and e-tailers come at the expense of spending elsewhere. Indeed, net of autos, retail sales have been flat for three months.
With a weak job market restraining incomes and cautious households saving more of their after-tax incomes, the retail sector is likely to continue the recent pattern of sluggish improvement for the remainder of the year.
***
The statements, opinions, and conclusions contained herein are based solely upon the author’s own studies, research, and personal experience. Neither J.H. Cohn LLP nor the author makes any representation or warranty as to the accuracy or completeness of this information. J.H. Cohn LLP and the author expressly disclaim any liability for any loss or damage which may be incurred, of any kind whatsoever, as a result of or arising from the use of any of the information contained herein or reliance on the accuracy or completeness of it.
Patrick J. O’Keefe is director of economic research at J.H. Cohn LLP. He can be reached at pokeefe@jhcohn.com or 877-704-3500.