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By Jason Stipp and Robert Johnson, CFA | 08-15-2012 02:00 PM

Retail Sales Not as Bumpy as They Look

Looking past the month-to-month volatility in retail sales reveals a trend of slow, tapering growth, with some hope for improvement in the months ahead.

Jason Stipp: I'm Jason Stipp for Morningstar.

We got the retail sales report for July this week, and it looked very good. Was it too good to be true?

Here with me to offer some insight on that report is Morningstar's Bob Johnson, our director of economic analysis.

Bob, thanks for being here.

Bob Johnson: Great to be here.

Stipp: Before we dig into the report and put it into some context, let's just talk about the actual number, 0.8% growth; that's a pretty good number. How does that compare and what did it look like underneath? How did the categories do?

Johnson: Well, the overall number, at 0.8%, would be one of the very best numbers of the recovery. It was a very good number and looked very good compared to the previous two months, May and June, which had both shown actually a decline in consumer spending. Some of that's oil-price related, but those two months were down and down relatively meaningfully--almost recession type levels. And the number this month was a clear pop-back in the other direction.

Stipp: So would you characterize this as a bounce-back from those two months [May and June] that maybe looked worse than they actually were, and this is just a correction, and the longer period is a better guess?

Johnson: I think the longer period, when you put the three months together, is a lot better guess. And I think if you did that, you'd say things were continuing a slow, painfully slow, recovery--that things aren't booming, but that we are seeing some improvement.

There were a lot of reasons why the numbers came together in the individual months, but I think that when you look at them in a longer context, we're doing OK.

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