Thursday, December 13, 2007

Retail sales -- don't pop that cork yet 

Ed Morrissey says I'm a little more pessimistic than him on the economy generally, and reports the new retail sales data are showing the economy steaming ahead. It's a very broad-based expansion of sales, no doubt -- even general merchandise moved up a respectable 0.5%. So where can I find a cloud in all that silver lining?

The most logical place to look is the fact that Thanksgiving was the earliest possible date, meaning the Christmas shopping season is more in February than usual. Now I would think seasonally adjusted data would pick that up, but maybe not. So I went to look at the last four years in which Thanksgiving fell on November 22, which are 1973, 1979, 1990 and 2001. Here's what I found using the data server FRED at the St. Louis Federal Reserve:

1973 November+0.8%, December -2.6%
1979 November +1.3%, December +0.3%
1990 November -0.3%, December -0.8%
2001 November -2.7%, December -1.0%
2007 November +1.2%, December ???

A couple of points worth making. We are in recession in 1973, 1990 and 2001. The 2001 numbers are from a different dataset than the earlier three dates (the new data we collect these days does not go back before 1992) and it is heavily influenced by the October number being so large after the shock to sales of 9-11. (October 2001 retail sales grew 6.6% because a good amount of shopping was not done in September.) 1979 sees us about to entire a recession the following January. Whether there's some reason these all fall on years when Thanksgiving is early ... heck, I don't know.

Nonetheless, in each case except 2001, November retail sales data was better than the December figure. So maybe some of the 1.2% was moving forward of Christmas sales. The 1979 experience wouldn't be a bad bet for the rest of the year.

I would also add the results of a poll saying 57% of Americans believe the economy is in recession now and information that tax collections from corporations may be falling cannot be really a sign that the economy is steaming ahead. I was never in the negative GDP growth for Q4 camp, but if I had a professional forecast under 1%, I'd hesitate before picking up that eraser.