When the news first came out about the "huge surge in retail sale for January 2021" I questioned if the numbers had been adjusted and was chastened by a national expert "we never use adjusted numbers." ¯\_(ツ)_/¯
Here’s What’s Hiding Behind the Massive Seasonal Adjustments in January Retail Sales
In whiplash charts. For example, department store sales soared 23% “seasonally adjusted” but collapsed 42% “not seasonally adjusted.” What gives?
We had another mind-twister this morning when the media proclaimed that in January retail sales “burst higher,” after the opposite had happened in December, when the media bemoaned the third month in a row of dropping retail sales.
But these are “seasonally adjusted” retail sales, and the seasonal adjustments in December and January are always huge. “Not seasonally adjusted,” retail sales collapse by about 18% to 22% every January during the merchandise-return binge (returns are negative sales) after December’s holiday shopping binge. So I noted a month ago that the massive
“seasonal adjustments” in December had gone awry and that Americans had not actually cut back but had splurged in a record manner, documenting this with charts that showed both “seasonally adjusted” and “not seasonally adjusted” retail sales.
And in January, seasonal adjustments went awry again, but in the opposite direction, sort of balancing out December’s “seasonally adjusted” debacle. And then there was maybe a small-ish added oomph of the stimulus checks.
“Seasonally adjusted,” which is what you read in the media this morning, retail sales in January jumped by 5.3% from December, to $568 billion.
But “not seasonally adjusted,” retail sales plunged by 17.3% in January from December, to $510 billion. That plunge was not quite as deep as the normal December-January plunge of 18% or more. And compared to January last year, retail sales were up 5.8%, after December’s year-over-year increase of 4.3%.
Green = “seasonally adjusted” retail sales; note the dip in December and the rise in January. Red = “not seasonally adjusted” retail sales; note the record spike in December that I’d pointed out a month ago, and now the plunge in January:
All this “seasonally adjusted” and “not seasonally adjusted” data was released by the
Census Bureau this morning.
Sales at ecommerce sites and other “non-store retailers” (mail-order operations, stalls, vending machines, etc.) in January,
seasonally adjusted, jumped 11%.
In December, these seasonal adjustments had gone awry, showing a 5.8% decline from November. But “not seasonally adjusted,” sales in December blew through the roof and hit a huge record of $112 billion, with an enormous spike from November, and were up 19% year-over-year, which
I pointed out in my analysis back then.
In January, with the flood of merchandise returns, “not seasonally adjusted” sales plunged 29.5% to $79 billion. So seasonally adjusted sales jumped 11%; not seasonally adjusted sales plunged 29.5%. That’s how huge the seasonal adjustments are. And when they go awry just a little, it makes a big difference.
But year-over-year, sales in January were up 22%. And the ecommerce boom continued unabated in December and in January – there is no sign, as was alleged a month ago, that Americans cut back in December:
Sales at new & used auto dealers and parts stores rose 3.1% in January from December, seasonally adjusted. “Not seasonally adjusted” sales plunged by 11.9% from December, to $103 billion, but was up 10.4% from January last year:
But wait…. these figures are not adjusted for inflation, and there have been and broad price increases in recent months in new and used vehicle retail sales, and these
price increases were confirmed yesterday by the largest chain of auto dealerships in the US, AutoNation. And the year-over-year sales increase of 10.4% appears to be mostly accounted for by price increases of new and used vehicles – and not an increase in demand.
Sales at building materials, garden supply and equipment stores are subject the gigantic seasonal adjustments. In January, “not seasonally adjusted,” sales plunged 10.7% in January from December, to $32 billion. But “seasonally adjusted,” sales rose by 4.6%.
Sales at brick-and-mortar department stores have always been brutally seasonal, with enormous spikes in December, and drop-dead plunges in merchandise-return-January. Huge seasonal adjustments attempt to iron out those plunges and spikes.
Seasonally adjusted, sales soared 23.5% from December. But “not seasonally adjusted” sales plunged 41.6% from December to just $8.3 billion, the worst January and the third-worst month overall in the data going back to 1992 (does not include the thriving ecommerce sales of department stores; they’re included in ecommerce).
The fact that department store sales went from +23.5% “seasonally adjusted” to -41.6% “not seasonally adjusted” indicates just how ridiculously huge the adjustments were to smoothing this out.
From January 2001 to January 2021, sales have collapsed by 45% despite 20 years of population growth and inflation. As you can see from the chart, there is zero hope for brick-and-mortar department stores. Their business model has been obviated by ecommerce:
To avoid further vertigo, the we will stick to “seasonally adjusted” data below.
Sales at Food and Beverage Stores rose by 2.4% in January from December to $72 billion (seasonally adjusted) and were up 11.8% from a year ago. Work from home and restaurant restrictions continue to shift consumption to the home from restaurants, cafés, cafeterias, office vending machines, office supply closets, business trips, and vacations:
Sales at Restaurants & Bars rose 6.9% in January from December to $55 billion (seasonally adjusted), roughly in the same range since July. This was down 16.9% year-over-year:
Sales at general merchandise stores (minus department stores) rose 2.5% in January from December, to $53 billion, and were up 8.0% from a year ago. This includes the brick-and-mortar stores of Walmart, Costco, and Target, but not their ecommerce sales:
Sales at clothing and accessory stores rose 5.0% in January from December, to $20 billion (seasonally adjusted), but were down 11% year-over-year. Despite 13 years of population growth and inflation, sales are up only 7% from 2007 levels, with growth having shifted to ecommerce:
Sales at sporting goods, hobby, book and music stores jumped 8.0% in January from December, to $8.2 billion (seasonally adjusted), and by 22.5% year-over-year:
Sales at furniture and home furnishing stores jumped 12.0% in January from December, to $11 billion (seasonally adjusted), and 11.7% year-over-year.
To get back to the theme of seasonal adjustments and how huge they are in January: “not seasonally adjusted” sales plunged by 13% in January from December.
Sales at Electronics and appliance stores soared 14.7% in January from December, to $7.8 billion (seasonally adjusted), but were down 3.5% year-over-year.
Alas, “not seasonally adjusted,” sales plunged by 27% month-over-month. Going from +14.7% “seasonally adjusted” to -27% “not seasonally adjusted” implies a mega-ton of seasonal adjustments, and even small shifts cause the results to go awry in a large way:
January is the worst month to draw conclusions on retail sales due to the seasonal plunge in sales from the surge in December, and due to the massive seasonal adjustments used to somehow iron out that plunge. The seasonal adjustments are much smaller for the rest of the year.
December had already been strong based on not-seasonally adjusted data, and sales in January were seasonally a lot lower, as they should be, but indicated a solid follow-up on the strong December. But the seasonal adjustments in both months went awry, showing December and the prior two months as way too weak and January as way too strong. And the $600 stimulus checks may have added a little oomph to the seasonal adjustments gone awry.