The Independent Market Observer

Retail Sales Data: “Snowdown,” Not Slowdown

Posted by Brad McMillan, CFA®, CFP®

Find me on:

This entry was posted on Apr 14, 2015 2:53:00 PM

and tagged In the News

Leave a comment

retail salesThe question about the economy lately has been whether or not we’re looking at a sustained slowdown.

A decline in expected corporate earnings has often heralded recessions, and with disappointing retail sales and employment numbers, many believe that the U.S. is looking at a significant slowdown at best, another recession at worst.

The counterargument, to which I subscribe, is that this is another example of a snowdown, not a slowdown, and that bad weather and some other onetime factors have combined to temporarily slow down the economy.

The great thing about economics is that we can wait and see what the data says. And, as of today, it's saying snowdown, not slowdown, with retail sales coming on very strong, although somewhat lower than expected.

The retail sales report hits a couple of different concerns: consumer spending, Americans' ability and willingness to spend the savings from gas prices, and the potential negative impact of weather. Overall, it offers a very good initial sign of where we’re headed for the next couple of months.

The news is actually good

To quote Capital Economics, “The 0.9-percent rebound in retail sales in March would seem to confirm that the coldest winter on record in the Northeast explains much of the weakness in the preceding two months.”

To anyone who lives in the Northeast, which is about 20 percent of the national population, that seems self-evident, but the details are worth a look:

  • Motor vehicle sales were up 2.7 percent, more than reversing the previous 2.1-percent decline.
  • Building materials sales did the same, rising 2.1 percent following a previous 1.8-percent decline.
  • Gasoline sales were down 0.6 percent as gas prices rose but people bought less (likely because of the weather), which explains the shortfall between actual sales growth and expectations.

Note that all of these changes support the idea that weather has been the problem, rather than a fundamental slowdown.

Stripping out two volatile components, autos and gas, retail sales were up 0.5 percent, which equates to an annual rate of around 6 percent. This is quite strong, and given that the weather in March still wasn’t so great, it suggests that even larger gains are possible once spring actually starts.

Signs of sunnier skies ahead

Despite the recent turnaround in the data, the fact remains that the first quarter got hit hard by the weather, just like last year. Unlike last year, though, the economy should still grow—probably by around 1.5 percent—rather than shrink. Even with another weak winter, things are markedly better than they were last year.

It looks very much as if we’re emerging from another snowdown, and spring is on the way.

                        Subscribe to the Independent Market Observer            

Subscribe via Email

New call-to-action
Crash-Test Investing

Hot Topics

New Call-to-action



see all



The information on this website is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.

Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets.

The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. All indices are unmanaged and investors cannot invest directly in an index.

The MSCI EAFE (Europe, Australia, Far East) Index is a free float‐adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada. The MSCI EAFE Index consists of 21 developed market country indices.

One basis point (bp) is equal to 1/100th of 1 percent, or 0.01 percent.

The VIX (CBOE Volatility Index) measures the market’s expectation of 30-day volatility across a wide range of S&P 500 options.

The forward price-to-earnings (P/E) ratio divides the current share price of the index by its estimated future earnings.

Third-party links are provided to you as a courtesy. We make no representation as to the completeness or accuracy of information provided on these websites. Information on such sites, including third-party links contained within, should not be construed as an endorsement or adoption by Commonwealth of any kind. You should consult with a financial advisor regarding your specific situation.


Please review our Terms of Use

Commonwealth Financial Network®