What Bubblevision Didn’t Tell You About “Upeat” Consumers: Real Retail Sales Ex-Gasoline Per Capita Still Below 2003 Levels

Actual, nominal retail sales grew at the robust annual rate of 4.8% after posting the best April performance since 2009. But there’s a problem with that.

Nominal Retail Sales Growth at 4.8% - Click to enlarge

Forget the seasonally adjusted headline number of a gain of 0.1% which missed conomists’ expectations of a 0.3% gain. Seasonally adjusted data is fiction designed for mass consumption. It is an excuse for lazy financial journalists to dispense with reporting actual facts because they assume, incorrectly, that you are too stupid to understand them.

In reality, April is virtually always a down month versus March. The fact is that this April’s actual, not seasonally adjusted month to month decline of 1.1% was far stronger than last year’s April drop of 2.9%, and also much stronger than the 10 year average April drop of -2.1%. This April was a very good month in nominal terms. The 4.8% annual growth rate is smack in the middle of the growth rate range of the past two years. 4.8%. That’s nearly 5 times the rate of US population growth.  It’s all good, right?

That’s in total nominal terms. It includes inflation. It is heavily skewed by the spending of the top 10% of households in wealth. It is boosted by growing tourism revenue. It does not represent the average American household.

The problem is that the average, real, inflation adjusted retail sales per capita, ex-gasoline 1, is growing far more slowly, and has not even recovered to the 2003 level. 2003, if you recall was at the bottom of a recession. Retail sales growth per capita has been stagnant for the past 11 years. This coincides with the well known data on real US household income which has been in a declining trend since 1998. The worst of that decline, by the way, occurred between 2007 and 2011, a period during which the Fed began offering free money to banksters, and printing money madly.  And you think that’s a coincidence?

Real Retail Sales Per Capita - Click to enlarge
Real Retail Sales Per Capita – Click to enlarge

Real retail sales per capita have mostly been growing in a range of zero to 4% over the past 3 years, averaging around 2.4%, or half the nominal growth rate. Even that overstates the reality for most Americans. That figure still includes the disproportionate impact of spending growth among the wealthiest Americans, as well as the 25% growth in the number of international tourists coming to the US. Many of them come to the US with the express purpose of shopping, but whether that’s their primary goal or not, all of them are spending in US retail establishments. That has boosted the growth of total retail spending which boosts the per capita numbers, obscuring what’s going on with most American consumers.

While we don’t know the actual spending growth of the bottom 90% of Americans, it’s obviously less than the 2.4% rate that includes the boost from the top 10% and from tourists. And we know that it’s less than they were spending 10 years ago. Most Americans are losing ground. Under those conditions it’s not likely that the US economy can continue expanding indefinitely.

US growth will eventually come to a halt if more Americans do not participate in the gains. Driving the gains at the top is the Fed’s free printed money stuffed into the trading accounts of Primary Dealers whom, in turn, lend nearly free money to their hedge fund customers. Meanwhile both of them extract massive rents from that system and spend some of it in US retail stores, thereby skewing the trend upward.  At the same time the financial engineering bubble spawned by ZIRP and QE creates no jobs and no benefit other than for banksters and hedge fund speculators–unless you include otherwise unemployed rocket scientists now writing financial engineering programs.

Eventually the weakened foundation of the US economy will cause this intellectually and morally outrageous financial scheme to topple. When that will happen is the issue. For that, we must focus on other data.

Notes: (1) I exclude gas sales because their growth is countercyclical to price changes which are volatile. When gas prices rise, the effect is to increase total retail sales even though consumers bought less gas. Likewise when gas prices fall, that decreases total retail sales while consumers may actually be buying more gas, so I exclude it.

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