Friday, December 11, 2009

The Real Reason for the rise in Retail Sales (Updated)

I heard Rush dismissing the rise in retail sales for November. He mentioned that sales at gas stations were up 6% from October and 8.9% year-over-year. That represents the bulk of the 1.3% increase compared to October (1.9%, year-over-year) in the advanced monthly sales for retail and food services.

Then I remembered hearing that fewer people traveled by plane for the Thanksgiving Holiday [emphasis added]:
The number of travelers by automobile is expected to be 33.2 million in 2009 compared to 32.5 million last year; an increase of 2.1 percent. The number of travelers by air is expected be 2.3 million compared to 2.5 million in 2008; a decline of 6.7 percent. The number of those traveling by “other” means, including, trains, watercraft, buses and multiple-modes of transportation, is expected to be 2.9 million compared to 2.8 million last year, an increase of 1.2 percent, AAA said.
"Retail sales" are sales of goods. Air travel is a service. As travelers switch from planes to cars, a portion of their travel expenses moves from the service category to the retail category. In other words, increased sales at gasoline stations in November make the retail sales numbers look better. If sales at gasoline stations had been steady, then the retail sales in November would've shown about a 0.75% increase over October. That would've been inline with analyst expectation, since, as the Statesman explains, the 1.3% month-to-month increase was "more than double the increase economists had expected."

Update: I edited the above to make the language more precise.

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