Real Retail Sales Suggest Slowdown, Not Recession
The chart above shows the 6-month moving average of the series for real retail sales, adjusted for inflation by the St. Louis Federal Reserve using the CPI, through December 2007. Several comments on this recent CD post mentioned that retail sales were not adjusted for inflation, and the graph above is in response to those comments.
1. Note that the CPI for January won't be released for another week, so it won't be possible to adjust January retail sales until then. But the strong January increase in retail sales following a decline in December suggests that real retail sales in January will probably look good, unless inflation comes in much higher than expected.
2. Note also that real retail sales were negative during the last recession. Although real retail sales growth of +1% at the end of 2007 certainly suggests an economic slowdown, it wouldn't signal a recession unless, and until real retail sales growth approaches zero or went negative.