Typically, post World War II recessions have had relatively little lasting impact on retail sales. The numbers will be sluggish for a few quarters, and then they’ll work their way back to the long-term trends.
In a great Calculated Risk graph updated with today’s positive retail sales data for September, it’s easy to see the trends over the last 20 years.
Note the modest decline in the 2001 recession in this data, which has been adjusted for seasonality, but not for inflation. Obviously if inflation were factored in, we’d see a less significant angle. Also, the numbers do not take into account population growth — this is total sales, not sales per capita. With the current rates of population growth and inflation, we should see a minimum yearly increase of 3.5% just to keep us even on a per capita basis.
The trend from 1992 to 2008 was remarkable in its evenness. Look, however, at the increasing spread between overall retail sales and retail sales excluding gasoline. With gasoline included (the blue line), we’re pretty close right now to the long-term trend line — clearly below it, but not by much. Now draw a line on the red line trend.
Yes, as Calculated Risk notes, “Retail sales are up 18.9% from the bottom, and now 4.5% above the pre-recession peak.” But we’re still well below the trend line we’d expect given inflation and population growth — about 8% below it appears.
And that 8% is the difference between businesses closing or hanging on rather than opening or expanding. In our consumer based economy, that accounts for much of the stagnation in the job market.
On a philosophical level, I like the idea of reduced consumption of many products. But on a practical level, such a sharp decline in spending has been disastrous for many Americans.
