Murkiness on Retail Sales and the Economy

By at 14 March, 2024, 5:28 pm

by Raymond J. Keating –

The latest retail and food services sales report from the U.S. Census Bureau didn’t exactly clarify matters regarding the state of the consumer.

The topline number was that retail and food services sales grew by 0.6 percent in February. However, while seasonally adjusted, these are nominal dollars, i.e., not adjusted for inflation. Inflation, as measured by the Consumer Price Index (CPI), registered 0.4 in February. That wipes out about two-thirds of that gain in retail sales.

For good measure, the change in retail and food services sales for January was revised from -0.8 percent to -1.1 percent. Again, that doesn’t include inflation, which came in at 0.3 percent in January.

And as noted in the following chart, nominal retail and food services sales have been down since September.

Source: Federal Reserve Bank of St. Louis, FRED

In addition, compared to a year earlier, retail and food services sales were up by 1.5 percent in February, and if we look at the most recent three-month period and compare that to the same period last year, to iron out some of the month-to-month volatility, then growth registered 2.1 percent. But inflation completely wipes out these gains, and it turns out that retail sales were down in real terms.

So, the February gain in this latest retail sales report is welcome, but when taking in the full picture, it’s hard to get a clear vision of where the U.S. consumer stands. It certainly hasn’t been good news over the past five months in particular. The outlook on the overall economy has been murky, and murkiness persisted with this retail sales report.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest books on the economy are The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist, The Weekly Economist II: 52 More Quick Reads to Help You Think Like an Economist and The Weekly Economist III: Another 52 Quick Reads to Help You Think Like an Economist.


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