Retail Sales Surge in September, What to Make of It?

The commerce department advance report shows a retail surge in September.

Advance Retail Sales  

The Commerce Department Advance Retail Sales Report shows a surge in September.

Advance estimates of U.S. retail and food services sales for September 2020, adjusted for seasonal  variation and holiday and trading-day differences, but not for price changes, were $549.3 billion, an  increase of 1.9 percent  from the previous month, and 5.4 percent above September 2019. Total sales for the July 2020 through September 2020 period were up 3.6 percent from the same period a year ago. The July 2020 to August 2020 percent change was unrevised at up 0.6 percent 

The above chart is from the Census Bureau. I created the lead chart to show how meaningless general merchandise is. 

Advance Retail Sales Select Categories

That chart provides a better clue as to how Covid affected retail sales. 

Advance Retail Sales Select Categories Detail

What's Down 

• Gas station sales 
• Food and drinking places 
• General merchandise
• Department stores

What's Up

• Nonstore retailers (especially Amazon)
• Motor vehicles and parts

What's Happening?

1. People are working from home. This decreases demand for gasoline and eating out.
2. Out of fear of Covid, people have shunned public transportation. 
3. Because of stimulus checks, many people made more unemployed than they did employed.
4. The combination of 2 and 3 led to an increase in demand for cars.
5. Nonstore retail shopping also surged, accelerating a trend that started long ago.
6. Department stores are on the death bed.
7. A surge in home sales led to a surge in demand for appliances, paint, home furnishings, etc. 

Misleading Numbers

The numbers are still misleading.

These numbers do not include services.  The Wall Street Journal comments on the Strong Retail Sales Numbers.

• Overall consumer spending remains below pre-pandemic levels because outlays on in-person services such as dentist’s visits, travel and sporting events haven’t fully rebounded.
• The retail-sales report doesn’t track spending on most services, such as health care and hospitality, which make up the bulk of U.S. consumer spending. 
• Blerina Uruci, an economist at Barclays, noted how strong consumer spending is for durable goods. “It’s a shift from services that in many ways is forced because people have to be more cautious due to the [coronavirus] pandemic,” she said.
• Real-time data from private firms show total consumer spending, which includes outlays for in-person services, is still lower than a year ago.
• Credit- and debit-card data collected by Affinity Solutions and research group Opportunity Insights showed that overall spending was down 2.3% at the end of September compared with January levels. JPMorgan Chase & Co.’s tracker of credit- and debit-card transactions showed spending was down 5.8% compared with a year ago through the week ended Oct. 10.

The Census Bureau charts make it appear as if there is a full recovery in retail sales. 

That's not the case. And there are big winners and losers from the distortions.