The "Real" Retail Story: The Consumer Economy Remains At A Recessionary Level

Tyler Durden's picture

Earlier this month, Retail Sales missed expectations for the 3rd month in a row, essentially flat on the month. As Doug Short rhetorically asks 'how much insight into the US economy does the nominal retail sales report offer?' With the release of the CPI data, we can judge this in 'real' terms (adjusted for inflation and against the backdrop of our growing population)... and the picture is anything but healthy.


Via Advisor Perspectives,

The "Real" Retail Story: The Consumer Economy Remains at a Recessionary Level

How much insight into the US economy does the nominal retail sales report offer? The next chart gives us a perspective on the extent to which this indicator is skewed by inflation and population growth. The nominal sales number shows a cumulative growth of 168.0% since the beginning of this series. Adjust for population growth and the cumulative number drops to 114.7%. And when we adjust for both population growth and inflation, retail sales are up only 24.8% over the past two-plus decades. With this adjustment, we're now at a level we first reached in September 2004.

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Let's continue in the same vein. The charts below give us a rather different view of the U.S. retail economy and the long-term behavior of the consumer. The sales numbers are adjusted for population growth and inflation. For the population data I've used the Bureau of Economic Analysis mid-month series available from the St. Louis FRED with a linear extrapolation for the latest month. Inflation is based on the latest Consumer Price Index. I've used the seasonally adjusted CPI as a best match for the seasonally adjusted retail sales data. The latest retail sales with the dual adjustment declined 0.1% month-over-month, and the adjusted data is only up 0.9% year-over-year.

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Consider: Since January 1992, the U.S. population has grown about 25% while the dollar has lost about 42% of its purchasing power to inflation. Retail sales have been recovering since the trough in 2009. But the "real" consumer economy, adjusted for population growth is 3.9% below its all-time high in January 2006.

As I mentioned at the outset, nominal month-over-month retail sales were up 0.04%. Let's now examine Core Retail Sales, a version that excludes auto purchases.

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By this analysis, adjusted Core Retail Sales were down 0.1% in July from the previous month, up only 0.4% year-over-year and down 1.9% from its record high in November 2007.

The Great Recession of the Financial Crisis is behind us, a close analysis of the adjusted data suggests that the recovery has been frustratingly slow. The reality is that, in "real" terms — adjusted for population growth and inflation — consumer sales remain below the level we saw at the peak before the last recession.

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Number 156's picture

Im still at a loss as to why anyone would open a newspaper or a webpage these days to look at charts such as these, when we already know 99% of these numbers are either complete fabrications or utterly useless for any serious trading.

Every day we see the market "hitting new highs" and "exceeding all expectations", when the reality is most of us have to work 60 to 80 hours per week just to maintain break-even in our lives as a debt slave, or we have already been pushed over the edge, and we have to sign up for Obamacare or worse. America is slowly being converted into a third world economy. Whats the thinking is up in Washington?:
'all is going according to plan'.

So remember this when you go to your neighborhood voting booth and vote for your new overlords.

Escrava Isaura's picture

"A man grows rich by employing a multitude of manufacturers; he grows poor by maintaining a multitude of menial servants." Adam Smith

knukles's picture

Da Man would have you believe otherwise. 
Like Alice Through the Looking Glass, this is He Through the Narcissism

Oracle 911's picture

Well their world is falling apart. Our is waiting for turbulent times to hit.

Number 156's picture

Actually, Escrava Isaura is correct when you consider the context of what hes saying with this rhetorical question:

Why do you think they want millions of 'undocumented aliens' to immigrate into the USA?

With Chinese manufacturing ready to ride off into the sunset thanks to cold war part deux, where will companies like Foxconn set up shop?

Next thing, you will see crates upon crates of novelty rubber dog crap with 'Made in the USA' logo on the bottom.


flyonmywall's picture

The point is that the average fucktard consumer who slept through his/her math class, paid no attention in US history class, barely passed some fucktard 2- or 4-year school has no clue about inflation, purchasing power, or the Federal Reserve.

Then they wonder why they cannot make ends meet, why they have a piss poor standard of living and live paycheck to paycheck, while shopping the next Walmart sale for a $98 TV set.

These are the voters of today and yesteryear, and to whom the mainstream media caters to. Useless eaters who will gladly kill you or turn you in when the time comes for a few noodles and another day of reality TV.

The readers of Zero Hedge are an endangered species, as thinkers and informed individuals. Prepare accordingly.


PAWNMAN's picture

If our GDP is in fact 70% consumer spending, how did we hit a 4.1% print? Don't think there is a single data point issued by the government that isn't doctored to hell and back. Welcome to the Peoples Republic of America!

r00t61's picture

If memory serves, ZH user adr has extensive experience in retail, from tales of channel stuffing to Walmart exerting its muscle on suppliers.  I'm hoping he'll chime in on this topic.

Walmart in particular is a bellweather in overall consumer spending and they have been having quite a tough time of it for several quarters.

Since the race to the bottom is on, does The Dollar Store become the new symbol of American prosperity?

adr's picture

Ah my ears were burning.

What these charts show is nothing but the bullshit channel stuffing to support publicly traded sq ft retail expansion. Trillions of dollars of traded product that never ended up in a consumer's hand.

Yes overall retail sales have increased since 1990 thanks to population growth, but I would say real sales per consumer have plummeted since then. I would argue the average consumer of 1985 bought more goods than the average consumer of 2014. In any real term that is a decrease in personal consumption. If the same standards of accounting were forced on corporations today as they were in 1985 I think you would see a real chart of retail sales far in the negative. Plus using a chart using real inflation instead of the BS government statistic.

The retail sales chart matches the performance of the stock market nicely doesn't it. One has to wonder if the stock market follows retail sales or if retail sales follows the stock market. It doesn't make much sense for sales of real goods to increase because of increases in the stock index, yet that is what seems to be going on.

Retail sales did not pick up as fast as the stock market did following the "end" of the recession in March '09. What did happen was a change in accounting rules that allowed for sales to be recorded even though they did not yet occur. Forward booking of sales went from being an unscrupulous accounting trick to obtaining mainstream acceptance. Corporations like Tesla and Solar City exist almost 100% on forward booked sales that may never materialize. Other accounting tricks like counting inventory as an asset instead of a liability were also given regulatory approval. This enabled companies like Select Comfort to go from a booked loss to a profit of a few hundred million in one quarter during the height of the worst recession since 1929. Are we somehow to believe that all of a sudden millions of people rushed to buy a glorified air bed between March and June when the company could barely give them away the three months prior? Kind of a weird coincidence that this massive increase in profit happened in the exact quarter the accounting rules were changed.

Then Bernanke essentially allowed every bankrupt company to borrow money near zero percent, keeping them in business even while increasing their overall debt load. The idea was the corporations were too valuable to go out of business even though they had all massively overbuilt to support an expansion is sales that was impossible. There would have been a chain reaction taking out at least 50% of retail sq footage without the debt rollover, but something that needed to happen. Do we really need Sears, K-Mart, JC Penney, half the malls, Bed Bath, etc.? Prior to the recession look how many retail chains we lost. Comp USA, Circuit City, Linens and Things, etc. If they were able to stick it out without massive problems for a few more years to live during the Bernanke debt bubble jubilee, they would probably still be here.

Everyone expected Sears to go under, JC Penney, Best Buy, but they are still here and even seen resurgences in their stock prices. Best Buy went from being near bankrupt to an all time high during a period of declining sales. How does that happen? It wasn't an increase in sales that supported the rise in Best Buy's stock but a reduction in operating losses. A reduction in operating expenses plus new debt issued at a substantial reduction in interest. Yet sales never really increased. You would expect a company whose stock rocketed to be supported by a corresponding increase sales. Yet again sales seems to lag stock market performance.

If you ask me how retail sales are going, I say terrible. There are a ton of companies propped up using VC money throwing everything at the wall hoping something will stick. They hope to last long enough to go public so they can pay off the millions in debt they racked up and give their owners a big payday. If you show $250 million in sales yet spent $500 million to achieve that, you aren't running a successful business. Of course if real sales were not your goal that doesn't matter. That $250 million could lead to a $3 billion IPO valuation. Pretty easy to finance your expansion an pay off debts if you sell off shares. Plus being public essentially let's you borrow infinite cash from the banks. 

Is essence it ain't real folks, it probably never was but at least there was some resemblance to reality. Today it is pure fantasy unrecognizable to anyone living in the real world.

starman's picture

Socialism has no need  for charts GDP or labor or financial statistics! 

Welcome to the new and impoverished sorry improved


Shad_ow's picture

The "Real" Economic Story: Depression

adr's picture

We need to also look at the tale of the consumer one generation removed. 

The real economy peaked in 1985-86. When I look at what we had in 1985 compared to now it isn't even close. We do have things that are far more technologically advanced, but nothing close to what would have been expected.

Just take a look at Back to the Future II. A movie that came out in 1989, taking place in 1985, that looked 30 years to the future. Uh we're at 2015 and don't have flying cars, fusion reactors, hoverboards, mainstream neural interfaces, everyday cybernetic implants, pills that cure cancer, and sure as hell didn't abolish all lawyers.

Yes one could argue we didn't reach the level of the Jetsons when we were supposed to as well. People of the 50s thought we would be colonizing space by now. We are actually rapidly advancing on the time period of Star Trek cannon when the world decended into chaos leading to WWIII. At least something seems to be following Hollywood forecasting.

In 1985 my family had two TV sets, two cars, lived in a 2000sq ft home, and my dad made $80k as a sales rep. We took vacations, went to amusement parks, went to baseball games, movies, and got just about anything we wanted. My mom didn't work. We belonged to a country club, but just about everyone did. A true middle class lifestyle. I asked my dad how many people he knew back then that made at least $50k. He said just about everyone he knew. There were tons of sales jobs, middle management positions, etc that paid that kind of money. The average worker made a lot more money and the top 10% made a lot less than they do now. That is how there was a middle class.

I made $90k last year, which puts me near the top 10% in America yet I can't afford anything close to the lifestyle I had growing up. Yes we have two cars, two TVs, and a lot of stuff but it isn't equal. I don't have anything close to what the top 10% of Americans had in 1985. The house we had in 1985, that my dad paid $82k for, now sells for $325k. I can't buy the home I lived in, can't even come close. An economy car costs the same today as a luxury Mercedes did in 1985. Comparing food cost, energy, and taxes is a sick joke. The amusement parks we went to no longer exist. I can't take my son to a movie every Friday night. Going to pro sport events, forget about it. We went to Disney for Christmas and it seemed like I had to sell a vital organ to pay for it. A country club membership? Ha, not driving a economy class Honda.

Kind of seems wrong that a wage in 2014 putting you in the top 10% would be the same as a normal guy in 1985. If wages kept up with inflation I would be making close to $200k. Top 1% based on the statistics, but I think that is what would be required to live at the same level as we did in 1985, which sure wasn't in the top 1% lifestyle. We didn't live in then Hamptons or Beverly Hills.

At least my dad had the luxury of being able to afford a great home when he bought it. I don't think he would have ever expected that 30 years later he'd be making less money doing the same job. His job could never buy today what it bought then. Right now he is wondering how he is going to pay his bills instead of heading out in the morning to play golf with his buddies. Some progress huh.

plane jain's picture


What the hell happened?  Yeah, we kind of know around here, but still.

My family in the 80s wasn't quite as swank as yours.  We were more the $50K family, had the 2000 square foot house, 2 cars, 2 country club membership, or fancy vacation.

Now my spouse makes more than your dad used to and we are paycheck to paycheck, working on buying a 70s era ranch under 1400 sq. ft. that was a rental for 7 years prior and needs a lot of repair.

My dad has passed.  My mom and brother are going under and mom is only a little further from the street because she gets a check from social security.

GeezerGeek's picture

Thanks for the recollections. My personal timeline goes further back, being one of those damned baby boomers. One of the earlier ones, in fact.

As such, I have witnessed even greater degradation in the value of the US paper dollar. Being old enough to remember seeing silver dollars in circulation, and having saved a few from back then, I delight in demonstrating the difference between real money and paper money. I point out that once upon a time, say the early '60s, one could buy four or five gallons of gasoline for a dollar. Which is what a silver dollar, converted to fiat, would buy you now. (Ignoring 'capital gains' taxes, that is.) I decided I wanted a Ferrari after seeing one on the cover of Road & Track Magazine in August, 1962. The price? $12,500. Suppose one had 12,500 silver dollars back then and, instead of buying that Ferrari, one put them under one's mattress. While you might not have slept well for the ensuing 50-odd years, there have been times recently where a new Ferrari was worth 12,500 ounces of silver. Rolls Royces were $20,000 back then. Well, you already know what went wrong.

It's not just the last 50 years, however, that saw our paper dollars shrinking in value. In the early '50s my father brought in about $4000 per year and handily supported a family of four.

I'm sure that many others could add stories as enlightening as yours. We should all get together and send a giant 'Thank You' to our masters in DC and at the Federal Reserve for making us so 'wealthy' while making us poorer.

holdbuysell's picture


It would take 30 seconds to explain one of these graphs, about as long as it takes Liesman take a sip of coffee and mumble a few half-truths.

What a waste of an opportunity....Oh wait!

fibonacci's claus's picture

dala store.  me shop da la store they have no fish sauce.  I need a fish sauce to create my famous poke baw vegitable speecial wonton soup for you