Can Retail Rouse the Recovery?

The U.S. consumer is bound to play only a lackluster role in this recovery. But this has not mattered to buyers of consumer discretionary stocks who are intent on using the typical business cycle recovery playbook in a recovery that is anything but typical.

The year-over-year growth rate of October retail sales ex-gas is nearly flat from a year ago, while the overall retail sales momentum is still just shy of closing that gap. With comparisons so easy against a year ago, when the global economy was in free fall, this is not a terribly inspiring result. Excluding autos, the sequential gain in October came up short of expectations, with only a 0.2% advance… Caution is still ruling, and for good reason.

Perhaps the dollar levels of retail sales tell the story more clearly. So far, we at best have a shallow recovery in overall retail sales, while furniture and electrical appliance stores are barely scraping out a trough.

Retail Sales

The latter categories are highly discretionary purchases, and it is these durable goods items that typically provide some of the largest thrust behind economic recoveries. So far, they have not been able to get back up off the mat. From the December 2008 lows in retail sales, the leading categories have been gas, general merchandise, motor vehicles, Internet, jewelry and health and personal care sales — not a very robust mix excluding cash for clunkers, gas price hikes and trinkets for the more discreet mistresses of Goldman partners.

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