Economy Watch: Inside the Volatile Retail Sector

By Dees Stribling, Contributing Editor

Monthly numbers show just how volatile parts of the economy can be. In May, retailers were presumably glad to see total U.S. retail sales rise 1.2 percent, according to the Census Bureau (since then revised to only 1 percent, but that’s still pretty good for one month). The month before, in April, retail sales didn’t move at all compared with March. Now sales have swung back in a downward direction: the bureau reported on Tuesday that U.S. retail and food services sales for June, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, came in at $442 billion, a drop of 0.3 percent from the previous month.

Year-over-year numbers tend to be more meaningful, but those too have been gyrating unpredictable when it comes to retail sales. Sales were up 1.4 percent in June compared with the same month a year ago, which represents a decent increase. But that’s down from the May, when the year-over-year gain was 2.7 percent; yet up from April, when the gain was only 0.9 percent. To use formal economist’s argon, then, retail sales have been all over the place in 2015. Some of that volatility is because of movements in the price of gas—the bureau doesn’t adjust for price—but not all of it.

As usual, there were also retail winners and retail losers in the monthly and annual numbers. Strictly speaking, gas stations were the biggest annual losers simply because the price of gas compared with a year ago is still much lower. AAA put the average price of a gallon at $2.775 on Tuesday; a year earlier, the average was $3.614. So gas station sales were down 17.1 percent this June compared with last June. (Though up 0.8 percent compared with May, since the price of gas edged up a bit recently.)

Other than gas stations, the other kinds of retailers that suffered annual declines in June 2015 were department stores (down 1.7 percent) and building material and garden equipment supplies dealers, which saw sales drop 1.4 percent this year. Perhaps some of their misery was because of the drought in California, which means more artificial turf and xeriscaping than before. But most retail categories did pretty well in terms of sales compared with last year, such as car dealers (up 6.5 percent), sporting goods, hobby, book and music stores (up 6.6 percent) and food services and drinking places (7.7 percent).