As always, real retail sales tell us a great deal about what is happening in the consumer economy. July continued the recent trend since gas prices started declining over a year ago.

Nominally retail sales increased 0.7%. Since consumer prices increased 0.2%, real retail sales increased 0.5%. Here they are compared with real personal expenditures on goods since just before the pandemic:

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Unsurprisingly, in the past year real retail sales have followed the trajectory of gas prices, declining in the second half of 2022 before increasing again in 2023.

Excluding gas sales, real retail sales have been almost relentlessly flat for the past 2 years:

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Also, because there is potent evidence that motor vehicle sales have improved sharply since supply chain bottlenecks started to unspool last year, below I show total retail sales (blue) compared with retail sales for motor vehicles and parts (red), and retail sales excluding motor vehicles (black). Also shown are the number of cars and light truck sold (gold):

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Clearly the improved sales of cars and light trucks are helping buoy retail sales.

To put it simply: the improvement in retail sales this year is coming from vehicle and gas sales, while consumers appear to be cutting back slightly on other purchases of goods.

Finally, because real retail sales /2 (blue below) are a short leading indicator for employment, here is the updated YoY graph comparing them as well as YoY real personal consumption of goods /2 (red) and YoY payrolls (black):

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This relationship continues to forecast continued deceleration in jobs numbers in the months ahead, although not an outright decline at this point. In other words, basically more of the same.

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