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By Robert Johnson, CFA and Jeremy Glaser | 01-20-2016 12:00 AM

No Comeback for Consumers (Because They Never Left)

Retail sales data has been noisy month to month, but the long-term growth trend has been remarkably steady, says Morningstar's Bob Johnson.

Note: Due to his travel schedule, Bob Johnson is giving his weekly economic update in this and an earlier video report. His written column will return on Feb. 20.

Jeremy Glaser: For Morningstar, I'm Jeremy Glaser. We had a strong retail sales report in January. Is this a sign that consumers are coming back, or have they been here the entire time? I'm here with Bob Johnson, our director of economic analysis, for his take.

Bob, thanks for joining me.

Bob Johnson: Great to be here today.

Glaser: This was a strong report for January. December's numbers were revised upward. Is this a sign that we're seeing an inflection point and consumers are starting to accelerate, or do you think this is just statistical noise?

Johnson: As you've implied, the consumer has been there all along, and the retail sales report has become incredibly difficult to analyze. But the good news is that the headline numbers looked very good to people. Instead of December being down 0.1%, it was up 0.2%. Just the sheer fact that it wasn't that disaster that everybody thought it was is a huge help to the psychology of where we are. Then to have an equally good number in January, that consumers didn't back off anymore despite what's happened in the market over the month of January... it sent a pretty powerful message to people that maybe things aren't so bad after all.

Glaser: What did this look like on a year-over-year basis?

Johnson: That is always the best way to look at it. It's about 3.5% or so, on a year-over-year moving average basis, on retail sales growth, which is about what it's been for most of the recovery. That's probably the average since 2010. We did have a brief period between mid-2014 and early 2015 when we did over 4% growth in the retail sales category. What happened there, that big boost in hiring right at the end of 2014, and also into the beginning of 2015, has skewed a lot of numbers. With all those new hires, a lot of people went out and purchased things when they were back on the job, and that's skewed a few statistics. And now we've dipped back to where we should be, and at this 3.5% level; it looks pretty good.

And by the way, at 3.5%, you probably have to add about 0.5% to that for goods deflation, so it's really more like 4%, and it has been there for the last few quarters. Most numbers aren't terribly different than that for the overall goods inflation rate.

I keep pointing out that the retail sales report is not inflation-adjusted, and next week we'll get the CPI, and just like we did last month, we'll go through and analyze what that means to the numbers.

Glaser: It looks like the consumer has been pretty steady, but you're not seeing any acceleration, though?

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