What The "Real" Retail Spending Report Reveals

When it comes to the validity, accuracy and honesty of government-sourced data, sadly there is much to be desired in the time of the New Normal, when governments have made it very clear they will resort to any measure to boost confidence - from the wealth effect to flagrantly doctoring economic (dis)information.

Luckly for now at least, the private sector provides a somewhat credible alternative, although even that is rapidly being subsumed by the government apparatus (see ADP morphing into BLS-lite). Still, it is a useful data point for those who still care about the anachronism known as "fundamentals." So in order to supplement the retail data disclosed earlier which according to some was the "most important retail spending" report in years, one useful counterpoint is sales data as disclosed by credit card processors such as MasterCard (sadly often hiding behind subscription paywalls). Here are some highlights of what a parsing such a recent report reveals, courtesy of Bloomberg.

• Since the end of 2009, growth in U.S. consumer spending has been driven largely by luxury goods and consumer staples. The middle class has less disposable income (or access to credit) available for discretionary purchases.
• The growth of U.S. retail spending (excluding autos) slowed from an annual average pace of 8 percent in 2011 to 5.1 percent in 2012. In the first five months of 2013, U.S. retail sales have been growing at an annual average pace of just 3.5 percent.
• U.S. consumers have been cutting spending on electronics, air travel and gasoline since the beginning of the year. In contrast, sales of necessities such as groceries and baby clothes are robust.
• U.S. spending on home furnishings and repairs continues to be robust, which suggests that the housing recovery still has some legs.
• On the other hand, the surge in spending on auto maintenance means that people are reluctant to buy new cars, preferring instead to repair what they already own. Similarly, there has been a significant decline in auto parts sales since the end of 2012.
• U.S. purchases of high-end jewelry have grown much more slowly than total retail spending. Moreover, high-end jewelry spending hasn't matched its peak in December 2007.
• Consumption in Canada has been weaker than in the U.S. for several years despite a much healthier labor market. This might be explained by the slowdown in China and the contraction in commodity demand.
• U.K. luxury spending seems to be at least partly driven by the prices of oil and natural gas. That suggests that wealthy Russians and Middle Easterners are a significant source of demand for high-end goods in British stores.
• The U.S., U.K. and Canada have all experienced a surge in "staycations" as families avoid expensive travel in favor of simpler -- and cheaper -- pleasures at home.
• Perhaps reflecting the global sell-off in commodities, spending on luxury goods in the U.K. has been declining from prior-year periods for the past six months. Growth in U.S. luxury spending has slower than total U.S. retail sales in the first few months of 2013.
• MasterCard Advisors estimates that Canadian retail spending has only increased by 0.5 percent in the past 12 months. As recently as March, the 12-month change in consumer spending was actually negative.

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