Real retail sales eased in November, returning to a negative annual basis

by a New Deal Democrat

Real retail sales are one of my favorite indicators of both the current economy and the jobs situation 3 to 6 months ahead.

This morning nominal retail sales for November were reported down -0.6%, only about 1/2 of October’s strong gain of +1.3%. As consumer inflation rose +0.1% for the month, real retail sales fell -0.5%. Here are the absolute figures for real retail sales from early 2021:

Banknote sales remained -1.1% below their most recent peak in April.

As I have noted many times, annualized real retail sales turning negative annually for 75 years is an excellent harbinger of a recession. With this morning’s data, they are negative again. Below is the data for the last 25 years:

I tend to discount the negative numbers in the first half of 2022 because they compare to strong stimulus-driven spending growth in 2021. But the numbers since June are much more cautious. In particular, it was noted that consumer spending has shifted from goods to services this year. While this point has many merits, as the costs associated with the pandemic recede more and more into the background, I think the historical connection will become more and more established.

As I’ve also noted many times, real retail sales /2 is a good, if noisy, leading indicator for jobs reports 3-6 months into the future. Here’s the historical record from the start of the modern retail sales streak to just before the pandemic:

And this is how they look as of June 2021:

That they have remained close to zero or even negative on an annualized basis for many months strongly suggests a continued slowdown in monthly job numbers over the next few months.

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