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?
- People are working from home. This decreases demand for gasoline and eating out.
- Out of fear of Covid, people have shunned public transportation.
- Because of stimulus checks, many people made more unemployed than they did employed.
- The combination of 2 and 3 led to an increase in demand for cars.
- Nonstore retail shopping also surged, accelerating a trend that started long ago.
- Department stores are on the death bed.
- 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.
Mish
Retail sales tracks consumer demand for finished goods by measuring the purchases of durable and non-durable goods over a defined period of time. Retail sales data is compiled, once a month, by the U.S. Bureau of the Census and includes sales from all food service and retail stores.
A big, big part of consumer income has been this yeat home equity loans and refinancing at the lowest terms ever. However while interest rates may eventually drop further, there’s not much to go. Futher, the prevailing economic atmosphere will be in the doldrums, if not worse.
We still have a very false economy. Massive amounts of government stimulus combined with the forbearance have combined to put a lot of money in certain peoples pockets. Many of the people seeing the increase in their disposable cash flow because of these factors are not for the most part the most frugal and financially sensible of our citizenry or they would not have been in a bail out position to begin with.
Instead of savings being a priority, many of the people with windfalls from these abnormalities are spending instead of saving. In addition at the opposite end of the spectrum are the people who are relatively unaffected by the current circumstances except for the way it has impacted their ability to spend money vacationing, dining, and spending on other types of entertainment. Many of the people in this demographic are now spending that money on home improvements and new hobbies they can do at home. In the event their is a substantial second wave of the virus this winter which looks very likely, look for the economy to take a second and possibly fatal hit that will end in a downward spiral of deflation and depression.
WOW. when you drill into the numbers its damn near exhilarating!
This is just more evidence of the ‘K’ shaped recovery.
Those with higher disposable incomes also were more likely to be able to work remotely and were also more likely to have jobs that were deemed ‘required’. Whether that is a fair assessment or not is open to debate, but that is the current state of affairs. These people have now had several months of savings from not utilizing the usual entertainment options (services) and they can now spend on other things. The pandemic does not look like it is ‘just going to go away’, so spending on bigger ticket items that make home life easier becomes a much easier sell.
I’d like to also say that this state of affairs definitely leaves the lower income tier of people very much SOL. Again, with the pandemic showing no signs of flagging, there is less and less chance of them going back to their ‘normal’ jobs. This is going to be a major dislocation and they WILL need help making the transition to whatever comes next for them. I don’t know what that looks like, however, and I’m willing to bet most others also don’t know.
The only thing I can take from this is that the majority of consumers are obviously not destitute. Thus, not passing a new stimulus bill is probably a good thing. It probably, as Mish indicates above, means that less spending on services leaves more money to spend on durable goods.
No, please do not make that assumption. Remember people in the bottom have less to spend so unlikely to move the bar as much as someone making $100K. But they matter a lot, because they are the people that keep us moving every day – driving buses, cleaning, providing health care, cleaning.
As the other entertainment options dwindle, Amazon provides fulfillment for the bored masses.