The retail report for May put a damper on economic hopes. For two consecutive months, retail sales fell. With about two-thirds of our economy dependent on consumer spending, this could be an ominous sign.
With every bit of economic news released, there is a corresponding headline. It’s either screaming good news, or it’s screaming bad news. I have found that most economic data is more nuanced than either extreme.
Each final number is made up of a variety of data points, and each must be kept within the context of trends. Various government agencies collect and process data on our economy in order to provide policymakers with information. If you want the real skinny on the economy, skip the headlines and look for the actual report.
When I want the details of a jobs report, I go to www.dol.gov. When I want to dig into the numbers on the retail report, I head over to www.census.gov. The full reports are posted online, along with the calculation method and breakdown for each set of information.
Most reports are adjusted for seasonal variations so that we get a better picture of improvements or declines. The retail report is “adjusted for seasonal variation and holiday and trading-day differences, but not for price changes.” The total decline for May was 0.2 percent month over month.
As I pore over the details, I note a couple interesting points. First, as with most data I am looking at now, the news is not just bad or good. Instead, it’s a mixed bag. On the bad side, sales in building materials and garden supplies are down 1.7 percent from April. Apparently, the construction/housing industry is still struggling.
On the good side, sales at gas stations are down 2.2 percent, and sales at food and beverage stores are down 0.2 percent. Did I say DOWN? Yes! Remember, this data is not adjusted for price changes. We didn’t stop fueling our vehicles, and we certainly didn’t stop eating! Prices have declined, and this explains some of the decline. Also, when prices decline on essential items, we are able to spend more on non-essentials, so this could be good news for other categories.
While the month over month figures show declines, remember we must step back and look at the broader trend. Year over year numbers show we are improving. This May’s sales are 5.3 percent higher than last May.
If you want a real surprise, pull up graphs of consumer spending and overall GDP for the last 5 years. You will see that we are spending more now than in 2007. You’ll also see that our economy is larger now than at the peak of 2007.
So, according to the headlines, the world is ending any minute, but according to the real economic data, we’re getting better. But don’t believe me. Go look it up yourself.