What’s Hot Isn’t Retail Sales Growth

Americans are spending more on filling up. A lot more. According to the Census Bureau, retail sales at gasoline stations had increased by nearly 20% year-over-year (unadjusted) in both May and June 2018. In the latest figures for July, released today, gasoline station sales were up by more than 21%. The last time they surged this much was September 2011, also the last time oil prices were having this big of an effect on consumer prices.

Overall, retail sales gained 6.41% year-over-year (unadjusted) last month. That followed an unusually large downward revision for June which cut more than half a percent off that month’s increase. Still, it was the third straight month around or better than 6%.

While that sounds terrific, and it is an unqualified improvement from the last downturn which ended in 2016, it is still more 2014 than 2004. The only factor that has changed is the price of gasoline.

Subtracting sales receipts from those types of retail outlets, the US consumer is faring worse in 2018 than in 2014. The difference isn’t enormous, but it is noticeable.

And it is very likely to have been noticed by consumers. It is the asymmetry of commodities. Overall, oil is still significantly less than it was in 2014, but Americans normalized to its lower price during 2015 and 2016. Though that was a downturn in the overall economy, especially the labor market, it would have been worse had oil prices been unaffected by the “rising dollar” (an impossible counterfactual).

The opposite, however, doesn’t follow. Now that oil prices have partially rebounded, it can still be the case that consumers feel its deleterious effects without having gained what the change in the oil price would have otherwise suggested. In other words, if the economy had actually accelerated with real momentum beyond the minor, typical upswing of the last lost decade, retail sales would be growing at upwards of 10% with sales at gasoline stations providing the last percent or two.