The retail sales data release [1] receives tremendous attention as a timely indicator of consumer spending as it shows whether consumers are picking up or slowing down the pace of their spending. So far this year, the news on the spending front has been positive. This increase in spending is fueled by, among other factors, the employment situation improvement and the payroll tax decrease [2] that went into effect in January. The retail sales report also contains information on sales by type of store (i.e., gasoline stations [3], warehouse clubs [4], food and drinking places). The detailed data quantify recent shifts in shopping patterns that we qualitatively know may have occurred, such as: increased purchases at warehouse clubs and superstores (the perception that those stores make our dollars go farther), gasoline stations (because of higher gas prices), and electronic shopping (convenience and selection) in contrast to the lower spending at building supply stores, furniture stores, electronics and appliance stores, and car dealerships.
The figure above shows changes in average monthly household spending by type of store between November 2007 and April 2011. To reveal the more detailed story about what type of stores have benefitted, we split the spending change in spending into two periods: from November 2007(when retail sales hit a peak immediately before the recession) to December 2010, and from December 2010 until April 2011, after the above-mentioned recent tax cuts took effect. We’ll update this through May when those data are released on Tuesday, but we expect the overall story to remain the same.
On the bright side, these detailed data show that sales at warehouse clubs actually increased pretty steadily during and after the recession as did electronic shopping. In fact, these two types of stores posted the largest increases in average household spending of any type of store during this period ($29 and $36, respectively). This shift arose for a couple of different reasons, including the increased availability of these types of stores and an increased demand for these types of stores as consumers made their dollars stretch farther. (For an interesting read on how “big box” stores more generally have altered the retail store landscape, I recommend “Mom-and-Pop Meet Big-Box: Complements or Substitutes?” (PDF [5]) a working paper (2009-34) from the Center for Economic Studies at the Census Bureau by John Haltiwanger, Ron Jarmin, and C.J. Krizan.) The data also show that from the beginning of the recession until last December, households significantly cut spending on motor vehicles and parts as well as department, building material, furniture stores, and electronics and appliance stores, with the latter three likely due to the weaker housing market.
This picture has brightened significantly: the average household spent $131 more per month at retail stores in April than in December, a big boost. Remember the average household disposable personal income increased by $164 during this period. Gasoline stations posted the largest increase [6] -- not surprising given the recent spike in gasoline prices. The fact that increased spending occurred broadly and notwithstanding the spike in gas prices is testament to the strong increase in employment and incomes during the first part of this year.
Finally, it is worth noting that spending at the warehouse clubs and electronic shopping continued to increase, perhaps suggesting a permanent shift in buying habits instead of a temporary shift induced by the recession. We will continue to watch this trend.
~Mark Doms, Chief Economist, Department of Commerce
June 13th, 2011
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