December retail sale thoughts - Issue with the Seasonal Adjustments IMHO

The numbers being thrown around in the media today (as issued by the Census Bureau this morning) reflect “adjustments” for seasonal variations, calendar differences, but NOT pricing differences, as noted with in the release. Given that pricing differences are not adjusted for, the decline in energy prices will certainly cause a decline in the component reflecting gas station sales.

I have reviewed components of the details and this note reflects some thoughts and findings.

The official release is at this link: http://www.census.gov/retail/marts/www/marts_current.pdf

Time Series Data, including adjusted and unadjusted figures, for categories is available at: http://www.census.gov/econ/currentdata/dbsearch?program=MARTS&startYear=1992&endYear=2015&categories%5B%5D=454&dataType=SM&geoLevel=US&adjusted=1&notAdjusted=1&errorData=1&submit=GET+DATA

The quoted figures used by the media are “preliminary” figures and are always subject to revision (and with great likelihood they will be revised).

The Adjusted Total Sales figure was down 0.94% from prior month, but unadjusted Total Sales figure was up 14.2% over the prior month! The Adjusted Preliminary December 2014 vs prior adj Dec from 2013 was up 3.17%. The Unadjusted Preliminary December 2014 vs prior yr unadj Dec 2013 was up 4.57%.

The Adjusted December figure may have disappointed due to the shift of traditional December retail buying for the holidays being done in November and Thanksgiving weekend. But, clearly December 2014 was better than 2013 using both the adjusted and unadjusted numbers. The seasonal adjustments applied very likely were in error for December and potentially for November.

Going through some of the detail:

Nonstore Retail – The adjusted figures show a decline of 1/3 of 1% from Nov to Dec. The unadjusted figures show an increase of 33.3% over November. Adjusted Dec increased by 5.15% over final adjusted Dec of last year. Unadjusted sales increased by 7.7% over last year. There definitely appears to be an issue with the “adjusted” figure used for the December number.

Adjusted Preliminary December Gasoline Stations was down 6.5% from November. Unadjusted Prelim Dec was down 7.2% from November. Per GasBuddy.com, average national gas price on Nov 15th was approx. $2.89 versus $2.50 approx. on Dec. 15th, for a decline in price of 13.5%. So the decline in gas station sales appears reasable.

Here is a chart of the shift in miles driven. Though it only runs through October 2014, one may logically extend the trend for discussion purposes.

Thus, in looking at the details of the pre-adjustment figures and the adjusted figures, there appears to be some inconsistency in the adjustments that have been made to certain components of the Sales figures. We certainly will see more when the Census Dept releases revised December figures next month!

Thanks for reading.

#howardisaacson #economy #analytics