April real retail sales steady, down sharply year-on-year and near bottom of 2-year range

– by a New Deal Democrat

The first of today’s three significant economic statements was retail sales, which rose +0.4% nominally for the month of April. There were minor minor revisions for February and March. After accounting for April inflation of +0.4%, real retail sales remained unchanged.

Here’s what the last 2.5 years look like:

After the wave of stimulus spending in the spring of 2021, except for one month last year, real retail sales failed to reach another significant high. In fact, their current level is near their lowest levels since then.

On an annual basis, real retail sales decreased by -3.4%. This is a very negative number. To show you why, I’ve added 3.36% to the annualized calculation for the past 21 months below:

And here is the identical calculation going back 75 years to the pandemic:

With the exception of one year during the Korean War, nearly the recession of 1966-67, and one month in 2002, year-over-year changes, this negative result only occurs in the depths of deeper recessions.

As I’ve also written many times, real retail sales (/2 y/y) are good, if noisy, short-term leading indicators for jobs, as shown in the recent short-term chart below:

We can expect a further slowdown in job growth in the coming months. In fact, the only reason I suspect jobs haven’t started to be cut yet is the accumulated shortage of workers needed to meet the huge spending increase that began with the wave of stimulus spending in 2021.

Finally, real retail sales make up about 1/3 of real manufacturing and trade sales, one of the “big four” monthly matching indicators that the NBER relies on most to determine whether the economy is in expansion or recession. Nominal real manufacturing and trade sales for March will be released later today.

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