Economy Watch: Retail Sales Slide in the Short Term, But Always Grow Otherwise

Retail and food services sales nationwide took another dip in February, against expectations.

Retail and food services sales nationwide took another dip in February, against expectations. The Census Bureau adjusts its figures for seasonal variation and holiday and trading-day differences—so the crummy weather last month didn’t cause the drop—but not for price changes. Sometimes the price of gas affects the total. But not in February, since gas prices edged up after months of decline. In any case, the bureau reported, retail sales came in at $437 billion, a drop of 0.6 percent from the previous month, but up 1.7 percent above February 2014.

Almost every category of retail enjoyed higher sales when compared with 12 months ago. Gas didn’t—it was down 23 percent—but it’s a slave to the price of an international commodity more than most other retail operations, and so isn’t representative of retail health. The other loser in annual retail sales grow was department stores (namely, sales were down 2.4 percent). Department stores are the Charlie Brown of the retail world, in that they’ll never be able to catch a break. By contrast, the biggest year-over-year winner in retail sales in February was non-store retailers. The Internet, in other words, is up 8.6 percent for the year.

One other thing to note: monthly ups and downs tend to be so much noise, annual differences less so. A look at retail sales patterns over the decades is a bit more informative. Though sales took a fairly steep drop during the late 2000s recession, they’ve mostly recovered since then. As recently as 1992, total sales were only around $160 billion per month. Sales have been climbing since then, even accounting for the most recent recession (and the 2001 recession barely dinted growth at all), and nominally have increased nearly 170 percent in the last 23 years. Adjusted for inflation, the increase has been about 58 percent since 1992, and if one adjusts for population growth since then as well, the increase is roughly 26 percent. Still a considerable uptick. Americans will not be denied their shopping experience.

What does it all mean for the prospect of retail development and leasing? In the positive column for bricks-and-mortar is the consistent growth in sales. In the negative column are Internet sales, which are partly a subtraction from physical store sales (just as Border’s). But perhaps the main determinant for the future of retail is that there’s already so much of it in this country. The U.S. leads the world in retail GLA per capita: nearly 23 square feet per person, which is far ahead of other developed countries. That fact alone is going to help keep a lid on development, and in some places gives tenants an edge when looking for new space.