January 19, 2007

Follow-up on Last Week’s Botched AP Report on Retail Sales

Last week, Associated Press reporter Martin Crutsinger portrayed a nominal increase in retail sales in 2006 of 6.0% as a slowdown compared to the 6.9% result from 2005.

Of course, as I noted last week, the nominal figures above ignored inflation. Taking inflation into account made 2006′s and 2005′s increases roughly the same in real terms, thus nuking Crutsinger’s contentions (“as Americans were battered by soaring gasoline prices, rising interest rates and a cooling housing market”) relating to why 2006 was lower (because it wasn’t).

I said “roughly” in the previous paragraph because December’s inflation report had not yet been released. Now it has been:

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1 percent in December, before seasonal adjustment, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. The December level of 201.8 (1982-84=100) was 2.5 percent higher than in December 2005.

(Note: Use of figures NOT seasonally adjusted is appropriate because an entire year is involved. In other words, all of the seasons are in there already.)

2006′s real increase in retail sales was 6.0% less 2.5%, or 3.5%. 2005′s real increase was 6.9% less 3.4% (see last week’s post), or ….. the same 3.5%. Both figures are actually pretty impressive after-inflation performances, essentially signaling a 3.5% increase in the component of GDP relating to the retail sector.

As I said last week: “Slowing,” schmowing. “Battered,” schmattered.

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