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Retail Sales: One Step Forward, Two Steps Back

The Census Bureau reported advanced retail sales for July today, and we had a few surprises.  Year-over-year, retail sales remain horrid though are showing signs of improvement.  Strangely, autos — which had been seeing year-over-year declines in excess of 20% for most of 2009 — actually outpaced overall retail spending, pulling the averages up!  

The federal “Cash for Clunkers” plan was obviously a major driver of this, so we should take these gains with the proverbial grain of salt.

On a month-over-month basis retail sales were down, breaking a decent run of improving months.  So much for the recession being over….

This is more or less what we expect from the retail economy for the next several years: a positive month here, a negative month there….  Retail sales will not march continuously downward, but they will certainly have a hard time gaining any real momentum.   How could they, given that the largest and richest generation in history is now massively cutting back spending and instead saving for retirement?

Charles Sizemore, CFA

Co-author of the recently-published Boom or Bust: Understanding and Profiting from a Changing Consumer Economy