Total business sales in March strongly suggest that real total sales have entered a decline

– by a New Deal Democrat

Today’s last significant economic report was total business sales for March. This is a nominal figure; the “real” number won’t be updated until personal income and expenses are reported for April in two weeks.

Here again the report was clearly negative. Not only did total March sales decline -1.1%, but January was revised down -0.1% and February was revised down -0.3% (blue below, vs. actual sales in red):

This would leave January’s real manufacturing and trade sales unchanged from December, deepen February’s decline, and since March producer inflation averaged about -0.3% and consumer inflation slightly increased, the “real” March’s number, when reported, is likely to be negative on the order of -0.9%, as shown in the chart below, which estimates the real number by averaging the producer and consumer price deflators:

For April real sales, which won’t be reported until the end of June, we can at least create a rough estimate by averaging real retail sales (which are about 1/3 of total sales) and industrial production. This estimate completely misses wholesale sales and also doesn’t account for changes in manufacturing inventory, so it’s less reliable – but as stated, it’s a start. The long-term, year-over-year view shows that it captures the trend about 90% of the time, even if it often misses the mark each month:

Here’s a close-up of the year-over-year change since the pandemic, which again shows that this method captures the trend, if not the exact monthly number:

And here is the monthly view for the last 2 years:

This method also predicts a significant decline in March and a slight increase in April.

Taken together, this morning’s three reports suggest that both production and real sales have declined since late or the end of last year, respectively. If so, then the producer side of the economy has entered a mild recession. We’ll have to wait for the April Personal Income and Expenditure report in two weeks to see if real consumer income has also started to decline.

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