Monday, July 18, 2016

The Appearance of Strong Sales

On Friday, the Commerce Department delivered a report on June retail sales that looked on the surface to be very positive. Sales rose 0.6 percent in June from May, which was far above the 0.1 percent consensus from Wall Street. Sales rose in virtually every category, even department stores. The only categories to see sales drop were clothing stores and restaurants and bars.

But there are some questions lurking underneath. For one thing, May’s initial report was revised down significantly, from a gain of 0.5 percent to only 0.2 percent. So the June number is in large part an offset of what now appears to be a mediocre May.

More importantly, look at the year-over-year number. Sales in June were up 2.7 percent over last June, while as recently as June 2013, that same number was 5.8 percent. That indicates the current monthly numbers are good - but far from great.

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