US’ May Retail Figures Not as Rosy as Portrayed

by Aegidius25

The government’s monthly report on retail sales recorded a 17.7% increase in May 2020 as compared to April. I find these number doubtful. With so many stores and other businesses shut and unable to provide sales data they are making these assessments based on incomplete data sets that are likely schewing the results. Stores that are still shut and can’t report a zero percent sales increase aren’t included in the count. Only those businesses that have survived and are still operational are reporting. And I suspect comparisons of sales figures made against the month-ago and year-ago period may only be comparing figures from these same still-existing businesses and not the many business concerns that have failed.

Surveys show that most Americans are scrambling to find ways to pay their more essential expenses. Large majorities either selling their possessions, borrowing from family and friends or dumping these charges on their credit cards to be paid down very gradually over time. They don’t have the money to go out and splurge on clothing, sales for which in this report supposedly increased 188%.

Finally all data in this report is SEASONALLY ADJUSTED; which sounds like a means to take seasonal factors into account when calculating its data, but ts really a practice by which they create long-run averages to compare current data to. Any deviation above the average is considered growth while any deviation below this average is considered a contraction. The downside to this is that it can misrepresent the actual situation. Say the economy’s been in a slump for a prolonged period and the average of changes in retail sales each month is -12.1% Then any number above -12.1%, even if still negative at say -5%, because it’s above the long-run average is still counted as a positive number with retail sales increasing in this scenario by 7.1%. While if the number were really -13% for a given month it would be ADJUSTED to a loss of merely -0.9%. The same goes for positive numbers; with an average increase in retail sales of 6% a month any number above that, say an increase of 9%, is ADJUSTED to show only a positive 3% increase, while anything below that is considered negative. For example an increase in retail sales of 4% would be ADJUSTED TO A negative 2% monthly rate.

 

Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence.