The NYT was quick to pronounce the November retail sales report as stronger than expected. There is no doubt that 1.2 percent growth compared with October levels looks strong on its face, but the rise in producer prices reported on the same day should raise questions. First, more than half the gain in reported sales was due to higher gas sales. This was due to higher gas prices, not a rush to the pumps. Pulling out the surge in gas sales, retail sales were up by just under 0.6 percent. This is still a decent pace, except that we don't yet know how much of this was due to higher prices, as opposed to greater sales volume. If the price of retail goods and services other than gas rose by 0.3 percent, than we are looking at a rather modest real growth rate in the 0.2 to 0.3 percent range. Since this follows a month of essentially no growth, that doesn't look particularly strong. This is especially the case, since the earlier than usual Thanksgiving undoubtedly shifted some holiday shopping forward into November. [addendum: the November CPI data showed non-shelter prices rising 1.0 percent. This implies real growth of retail sales of approximately 2.0 percent. Given the early Thanksgiving this year, that looks extremely weak.]
--Dean Baker
