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By New_Deal_democrat December 15, 2015 10:43 am
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Four takeaways from November real retail sales

As I have often written, real retail sales is perhaps my favorite metric, because it can be mined for so much information about the current status and future trend of the economy.  With CPI being reported this morning as unchanged, we now have this metric through November.  Let's look at it a number of separate ways:

First of all, real retail sales set a record:

This tells us that the expansion is intact.

Next, YoY real retail sales are useful in projecting nonfarm payrolls in the 6 month period thereafter.  Most recently, YoY retail sales growth has decelerated (blue), and nonfarm payroll growth (red) has followed suit:

Growth, but at a slower pace than a year ago, is what is indicated for jobs in the next few months.

Next, comparing YoY real retail sales (blue) with YoY real PCE's (red) tells us whether we are early or late in the expansion, as real retails sales tend to accelerate first out of a recession, and decelerate first in the latter half of an expansion. Here's the updated status:

This continues to provide strong evidence that we are past mid-cycle.

Finally, real retail sales per capita are a useful long leading indicator, tending to peak about a year before a recession starts.  These have been basically flat since July, and November failed to exceed the September high:

This leaves open the possibility of a recession starting sometime in the second half of next year. Since two other long leading indicators - bond yields and corporate profits - are also no longer flashing green, this gives added importance to housing permits and starts, which will be reported on Thursday.

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