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Thursday, July 15, 2010

Look at the Bright Side of Retail Sales: STILL UP Y/Y and Don't Forget Recent Commentary from Many Areas

The media had a field day focusing on the month over month decline in "ADVANCE MONTHLY SALES FOR RETAIL TRADE AND FOOD SERVICES" released by the Commerce Department yesterday (please see Economic Indicators . Gov for this and more).
Dim retail sales hurt economy as Fed sees weakness- AP
Inventories Rise as Retail Sales Sag - WSJ

It's true that a sequential M/M increase would be preferable and that sales remain well below the 2008 peak -- from the WSJ article:

Yet, we remain perplexed as to why so few people seem to focus on the Y/Y increase, even if we all know we're up again easy Y/Y comparisons that will soon face more difficult comps. We need to look at the historical figures over many years, but we suspect there may also be some negative impact from summer seasonality (e.g. less shopping, more vacations and leisure time, unless the latter normally offsets the former -- we're not sure). Here's the primary text from the government release (emphasis added):
  • The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for June, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $360.2 billion, a decrease of 0.5 percent (±0.5%)* from the previous month, but 4.8 percent (±0.7%) above June 2009. Total sales for the April through June 2010 period were up 6.8 percent (±0.3%) from the same period a year ago. The April to May 2010 percent change was revised from -1.2 percent (±0.5%) to -1.1 percent (±0.2%).
  • Retail trade sales were down 0.6 percent (±0.5%) from May 2010, but 5.0 percent (±0.7%) above last year. Nonstore retailers sales were up 12.1 percent (±2.1%) from June 2009 and gasoline stations sales were up 8.8 percent (±1.8%) from last year.
A chart from the release shows negative auto performance particularly impacted the M/M figures while all areas show Y/Y increases:
We know things aren't great in a number of areas (real estate, per our mention in prior posts) and that the consumer remains strapped, yet we think Y/Y growth is being overlooked. In fact, looking at the full report, all but one area -- department stores -- saw Y/Y growth for the first six months of 2010 versus 2009. We include a partial view here (click to enlarge or see site for full detail):

At least we're seeing Y/Y improvement -- growth is better than the alternative, even if from a low base. Also, remember that we're seeing other positive developments in global trade and manufacturing, with shipping activity stateside implying renewed consumption in many areas. Prior posts around this topic -
From these and other posts, don't forget about commentary from Lincoln Electric (LECO), Baldor Electric (BEZ), Pier One Imports (PIR), and Select Comfort (SCSS).

Finally, if still not convinced, we recommend reading the following 6/18 post from Jeff Matthews Is Not Making This Up, a blog we frequent:
He includes a range of commentary around what's happening in Europe, on the hiring front, and across different sectors. It's all pretty consistent with what we've been seeing and hearing.

Happy investing,

Jeffrey Walkenhorst

Disclosure: none.

© 2010 Jeffrey Walkenhorst
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