Magazine article Modern Trader

Retail Data Is All Smoke

Magazine article Modern Trader

Retail Data Is All Smoke

Article excerpt

The Vice Index is strongly correlated with Retail Sales with a multi-month lead, excluding auto sales and gasoline (see "Spending is no vice"). Note the surge in Retail Sales (excluding auto and gasoline) that began last summer. That's when gas prices started to plunge. It's also when the Affordable Healthcare Act (a.k.a. Obamacare) began to hit its stride.

Consumer propensity to spend remains strong. However, while the Vice Index is correlated to retail (excluding autos and gas), it has recently diverged from total retail spending. Drilling down, retail has slowed faster than otherwise indicated by the Vice Index. That's mostly due to declining oil prices. With oil prices sliding, many are wondering why official retail trade figures declined over the first half of 2015. One naturally would ask why the benefits of gas prices are failing to show up in retail spending figures?

Shouldn't retail (excluding autos and gas) be increasing if falling prices at the pump have put money into consumers' pockets? It is. Spending on certain lifestyle fun, like food services and drinking, continues to surge. The problem is that retail trade figures exclude a big chunk of consumer spending. Except for food services and drinking, retail figures do a lousy job of tracking recreation. Disneyland's multi-billion dollar ticket sales? Not included. Airline tickets and hotels are not included. Neither are gambling, prostitution or drugs.

That's where we come in and set the record straight.

Gambling revenues are up. We predicted that April would show continued growth in gambling revenues. Sure enough, that's what happened. Compared to last year, April gasoline sales were down $10 billion. So, where did that savings go?

Some went to gambling. First-quarter weather cooled gambling excursions, but a spring rebound has started to bring them back in the second quarter (May's gambling figures include the Mayweather-Pacquaio prize fight, which likely boosted results). …

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