Retail Sales

A quick note:

Retail sales rose quite strongly last month despite higher payroll taxes. Overall sales grew 1.1% in February, the biggest increase for five months. Much of that was accounted for by higher gasoline prices – sales of gas rose 5.0% because the average cost of gasoline rose 12% per gallon – but other sectors saw gains as well.

Excluding gasoline, other retail sales rose a decent, but not great, 0.6%. Growth was a mixed bag. Auto sales grew 1.1%; Internet and mail-order sales grew 1.6%; home improvement stores saw 1.1% growth; and supermarkets notched a 0.8% gain. On the downside: home furnishing stores had a 1.6% decline; sporting goods stores a 0.9% decline; while bars and restaurants saw sales go down 0.7%.

It is difficult to predict what sales will do over the next few months. Wages are not growing, savings are getting tapped out, and that payroll tax increase is biting hard, especially in lower income groups, so continued growth will be tough to maintain.

Last month’s data has hints of this.

The drop at restaurants and department stores suggests that lower income households shifted their buying to cheaper sources and began to tighten their belts because the payroll tax increase represents a much larger decrease in disposable income that it does at higher income levels. Conversely stronger auto sales and the pick up in home renovation seems to suggest that higher income families are still able and prepared to spend. This dichotomy is likely to continue as Congressional efforts to increase inequality by lowering worker and small business disposable incomes whilst pandering to upper income and big business interests divides the economy ever more.

Yes. I meant that.

Inequality is a deliberate outcome of policy. It is not an accident.

We are busy creating a class based society along old fashioned European lines. Get used to it.