The true health of US retail

Economics is a tricky subject. As the late great Henry Hazlitt reminded us,  the immediate observable effects don’t tell us the full economic story.  Rather, economic truth comes from the deeper underlying – often hidden –  realities that appear by looking long-term at the whole.

Keep this in mind when evaluating the state of the economy, or more specifically, the current state of retail.

Are retail sales up in the US since the pre-financial crisis peak of 2007? There is plenty of data – especially from the US Federal Government – that support that they are. After all, the Dow is at historic highs, durable goods orders are up half a percent over this time last year and unemployment is down by half a percent since the beginning of 2014.

Do these numbers indicate the true health of the US economy? Is there reason to celebrate the recovery of retail?

Looking simply at at the current level of monthly retail and food service sales in the following chart, things look good.

Retail-Sales-unadjusted

 

But if we adjust these numbers for population growth and inflation in order provide us with an accurate look at real retail growth, the following chart tells us something very different. Retail sales are still down 3.7% from the peak of the pre-2008 financial crisis.

 

This analysis and clarification is important to you as a retailer or a supplier to retail so that you can align your investments and/or funding opportunities to the reality of the US economy, not to out of context surface indicators.

Is the US economy improving? We believe slightly so, but then again, Henry Hazlitt would point us to the balance sheet of the US economy showing $17 trillion in the red and suggest otherwise. Be careful, retailers. You operate in uncertain times.

* charts from dshort.com

About Mike Lake

Mike is the Senior Vice President of Marketing for Evergreen Trading. When not playing jazz trombone he is probably obsessing about writing content that will capture the attention and interest of business people and fellow learning junkies everywhere.

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