The advance retail numbers for July will come out tomorrow from the Commerce Department, but Gallup’s survey of consumer spending gives a pretty good indication that the report won’t boost the notion of Recovery Summer. In fact, it may be more like Flashback Summer, except that last year’s numbers look better than Gallup’s survey shows now. While spending shot upward in August 2009 in reaction to a heavily discounted back-to-school season, spending this year is declining:
Americans’ self-reported spending in stores, restaurants, gas stations, and online averaged $62 per day during the week ending Aug. 8. Early August consumer spending trends trail 2009 and will need to surge to match last year’s anemic back-to-school results.
Gallup’s consumer spending measure averaged $68 per day in July compared with $67 per day in June. This is consistent with the “mixed” chain store sales reported in July and the consensus expectation of a 0.2% increase in retail sales, excluding auto sales, when the Commerce Department reports on Friday. Retail sales is a broader measure — it includes the total receipts at stores selling durable and nondurable goods — than Gallup’s spending measure, which is more oriented toward discretionary spending, but the two measures often trend together when auto sales are excluded.
More importantly, Gallup’s weekly spending measure for the first week of August shows no improvement over that of the last week in July or that of the same week a year ago. In turn, this suggests that back-to-school sales are unlikely to substantially exceed last year’s depressed levels. In fact, this week’s comparable of a year ago was a big spending week, making for challenging sales comparables for many retailers this year.
Their chart tells the whole story:
What’s most interesting about this chart is how closely spending has remained to last year’s “depressed levels.” During the summer, 2010 has had a couple of slight peaks where 2009 remained mainly steady, but otherwise there hasn’t been a real improvement in overall consumer behavior. The slide in the past week shows that consumers may be either waiting for bigger discounts to hit or eschewing large-scale purchases in one of the most critical retail seasons of the year.
We’ll know more which is the case over the next couple of weeks, but Gallup is correct to note that 2010’s August looks worse than what should have been a baseline bottom in 2009. If sales don’t pick up substantially, retailers may be shedding jobs by mid-September.
The July retail numbers look like they may show a year-on-year gain in tomorrow’s report, but may have gone down slightly compared to June, which wasn’t a positive month at all (-0.5%). Gallup isn’t a rock-solid preindicator, but it’s certainly worth considering.