Two elephants in retail: A historic spike in prices of goods and seasonal adjustments as the Pandemic upended seasonality.
By Wolf Richter for WOLF STREET.
The two big elephants in retail sales over the past 12 months, and particularly this January, were horrendously spiking retail prices of goods and seasonal adjustments when the pandemic upended normal seasonality. A month ago, these seasonal adjustments caused December retail sales to drop sharply, amid a lot of hand-wringing about the health of the consumer. But not-seasonally adjusted retail sales, as I pointed out at the time, spiked to high heaven, testifying to the will of consumers to spend money like a drunken sailor.
In January, retail sales always plunge after the holiday binge, in part because people return the stuff, and returns count as negative sales. And in January 2022, not-seasonally-adjusted retail sales plunged by 18.5% from December, to $581 billion, according to the Census Bureau today. But this plunge was smaller than the past 11 Januaries that averaged 20.4%.
Compared to January 2021, which eliminates seasonal issues, retail sales jumped by 12.3%. In December, retail sales had jumped by 16.6% year-over-year. Every month since March 2020, retail sales jumped by the double digits. These are huge and unprecedented year-over-year increases:
Seasonally adjusted, retail sales jumped 3.8% in January from December, to $650 billion, after having dropped 2.5% in December (red line).
Not seasonally adjusted, sales dropped 18.5% in January to $581 billion (purple line), but that was a smaller drop than in most prior Januaries. Compared to January 2021, sales were up by 12.3%, and compared to January 2020, by 21%! Note the seasonal regularity in pre-pandemic years, and how the pandemic has upended that pattern – and shifted it higher:
How much of the 12.3% jump in sales year-over-year was due to price increases?
Retail sales are sales of goods. Services, such as haircuts, insurance, transportation services such as plane tickets, rents, etc. are not included in retail sales. Products that retailers sell can be grouped into two categories: durable goods (vehicles, auto parts, appliances, building materials, electronics, etc.) and nondurable goods (mostly stuff bought at the supermarkets and at gas stations). And inflation has been spiking ridiculously in both durable goods and nondurable goods.
Durable goods CPI in January spiked 18.4%, highest on record going back to the 1950s (red line). These are the price changes that inflate retail sales at auto dealers, ecommerce operations, home improvement stores, etc.
Nondurable goods CPI spiked by 9.8% in January (purple line). These are the price changes that inflate sales at gas stations and at stores that sell food, beverages, and household supplies:
New & Used Vehicle and Parts Dealers: Spiking prices hide decline in unit sales.
Sales at new and used vehicle and parts dealers, on a seasonally adjusted basis, rose 5.7% in January from December, to $133 billion. Not seasonally adjusted, sales fell 8.9% for the month to $116 billion. This is the largest retailer category, normally accounting for over 20% of total retail sales.
Compared to January last year, sales were up by 11.4%, and compared to January 2020, by 24.4%. These are huge year-over-year sales gains, where the spike in prices and the shift to higher-end models overcame the plunge in unit sales, caused by the collapse in inventories of new vehicles due to the semiconductor shortage:
But crazy price spikes covered up plunge in unit sales: New vehicle prices spiked by 12.2% in January year over year, according to the CPI for new vehicles:
Used vehicle prices spiked by 40.5% year-over-year, according to the used vehicle CPI:
But the number of new vehicles delivered to end users plunged by 10.4% from January 2021, and by 11.1% from January 2020, to 991,200 new cars and trucks, amid widespread shortages leading to above-MSRP prices at new-vehicle dealers. This was toward the bottom of the four-decade range:
The other retail categories in order of sales volume.
Sales at ecommerce and other “nonstore retailers” jumped 14.5% in January from December, to $94 billion seasonally adjusted.
Not seasonally adjusted, sales plunged 25.4% to $86 billion. January is the month of returns, and returns are booked as negative sales, but it happens every January, and so seasonal adjustments try to iron them out. Year-over-year, sales were up 8.9%, and compared to two years ago, sales were up 38%.
Food and Beverage Stores: sales rose 1.1% for the month, seasonally adjusted, to $79 billion. Year-over-year, sales jumped by 8.0%, nearly all of it due to higher prices, as the CPI for food-at-home jumped by 7.4%. Compared to two years ago, sales rose 20%:
Food services and drinking places: Sales dipped 0.9% for the month seasonally adjusted, to $72 billion, the second month in a row of declines as some people pulled back from eating out due to Omicron. Year-over-year, sales were up 27%, and compared to two years ago, sales were up 8.6%, amid massive price increases: the CPI for food-away-from-home jumped by 6.4% year-over-year:
General merchandise stores: Sales jumped 2.5% for the month to $60 billion, seasonally adjusted, up 6.9% year-over-year and up 21% from two years ago. Walmart and Costco are in this category, but not department stores.
Gas stations: Sales fell 1.3% for the month, to $54 billion (seasonally adjusted), pushed down by a decline in gasoline prices from December of 0.8%. Year-over-year, sales at gas stations were up by 33%, powered by a 40% year-over-year jump in gasoline prices.
Building materials, garden supply and equipment stores: Sales rose 1.3% for the month, to a record $44 billion seasonally adjusted, up 12.7% from January 2021, and up 30.5% from January 2020.
And just for fun, the actual sales, the not seasonally adjusted sales dropped by 9% in January from December, as they usually do, with Januaries and Februaries marking the seasonal trough (purple):
Clothing and accessory stores: Sales rose 0.7% for the month, to $26 billion, seasonally adjusted, up 22% year-over-year, and up 14% from two years ago:
Miscellaneous store retailers, which include cannabis stores: Sales dipped 0.1% for the month from a record, to 14.8 billion (seasonally adjusted), up 15% from a year ago, and up 27% from two years ago. This category includes specialty stores for cannabis products, beer brewing supplies, telescopes, art supplies, etc.
Department stores: sales jumped 9% for the month, after having plunged 7.0% in December and 6% in November, to $10.9 billion (seasonally adjusted). Compared to January 2021, sales were up 11% and compared to January 2020, sales were up 8%. Alas, sales are down 40% from the peak in the year 2000.
Furniture and home furnishing stores: Sales rose 7.2% for the month, to $12.4 billion (seasonally adjusted), up 2.7% year-over-year, and 19% over two years:
Sporting goods, hobby, book and music stores: Sales fell 3.0% for the month, to $8.7 billion (seasonally adjusted), but were still up 1.3% year-over-year, and 28% over two years:
Electronics and appliance stores: Sales rose 1.9% for the month, to $7.3 billion, down 3% from a year ago, and down 2% from two years ago. Consumer electronics and appliance sales are vast, but much of it is sold online and at other retailers, such as Costco, Walmart, and Home Depot, with specialty brick-and-mortar stores, such as Best Buy’s stores, on their way out.
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