2/15/2005

Retail Sales Take Dip In January

Not since last August have retail sales dipped so much. The 0.3 percent decrease in January came from many different factors. Slipping auto sales, electronics, and home appliances all contributed to the dip. On the positive side of things retail clothing and clothing accesory stores experienced a 0.6 percent increase for the month. That was almost twice what analysts were predicting. So what does all of this mean to you and me. Well we are consumers. We pay for these things, we demand these things. But what do the numbers mean. I believe they are some arbitrary means to compare progress. So how does a dip in retail sales really affect me? I think the whole idea here is to measure where we stand as an economy. If we know that retail sales fell last month then we can take the appropriate measures to not let it happen next month. My point that I'm trying to get at here is we need to study economics by participating in economics. So go out to eat tonight. You'll be glad you did because then you'll know that at least you helped to contribute to restaurant sales in the month of Febuary. Please help me out here. Why are these insignificantly small numbers so important? [0.3%, 0.6%] Does it really make any difference how much retail sales fell. It seems so immaterial to me.

2 comments:

sandy said...

I would say look at past years. When haven't sales dipped in January? January is known as the holiday recovery month. Everyone just got done spending double and triple (if not more) than what they usually do. I'm sure December sales more than compensate for the lagging retail sales in January.

Dr. Tufte said...

This could be better related to Managerial Economics.

Drake is asking two questions: why should we care about retail sales, and why should we care about numbers that are so small.

Economists care about retail sales because they tell us how consumers feel. Drake recommended that we go out and participate in the economy. Retail sales is one of the ways that economists capture whether or not people actually did that. Last month they didn't. That's worrisome because money wasn't spent that could be someone else's income.

Economists care about numbers that are so small because of compounding. A drop rounded to 0.3% in a month compounds to a drop of over 4% in a year. How would you like to take a 4% pay cut? In my house, I'd have to cut one very large trip to the grocery store a month to manage that. The bottom line is the 0.3% seems insignificant, but that is an illusion.

With respect to Sandy's comment, retail sales (and most other statistics) are seasonally adjusted before they are announced. So, there is no tendency for announced figures for January to be lower or higher than any other month.