Editor’s note: This article was originally published on August 18, 2020, by Menzie Chinn here.

In these times? Among other reasons, it’s: (1) An indicator of household consumption behavior; (2) An indicator of conditions for business – including small/medium size enterprises. Hence, the recovery of retail sales has been much lauded. But if you thought the recovery was in brick-and-mortar retailers, you’d be somewhat misguided.

First, for retail sales and food services, sales are clearly up relative to trend, in real (CPI-deflated) terms. But then, interestingly, real sales were essentially flat at the end of last year, coming into this year.

Figure 1: Total retail and food service sales (black), excluding e-commerce sales (teal), excluding nonstore sales (brown), all in millions of 1982-84$, s.a., on log scale. E-commerce sales quarterly data converted to monthly by dividing by three. All deflated by CPI-all. Source: Census, BLS via FRED, and author’s calculations.

Second, there is a definite recovery of real retail sales (ex-food services), indeed jump above (flat) trend. However, the excess over pre-shock trend seems attributable to e-commerce.

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Figure 2: Total retail sales (black), excluding e-commerce sales (teal), excluding nonstore sales (brown), all in millions of 1982-84$, s.a., on log scale. E-commerce sales quarterly data converted to monthly by dividing by three. All deflated by CPI-all. E-commerce sales quarterly data converted to monthly by dividing by three. Source: Census, BLS via FRED, and author’s calculations.

Third, even if real retail sales have recovered in levels, that still means that there was a loss of sales relative to what would have occurred otherwise. In other words, just because the flow is back to pre-shock levels doesn’t mean accumulated flows (sales) are. To show this, consider the cumulative deviation from trend of nominal retail and food service sales; it’s about $233 billion.

Figure 3: Cumulative deviation from trend of total retail and food service sales (black), in millions of dollars, s.a. Trend in sales calculated as time trend in logs, 2019-2020M02. Source: Census via FRED, and author’s calculations.

As the bite from the reduction in enhanced unemployment insurance benefits increases, I expect sales to dive in September (and may have stalled in August as public health restrictions increased in many states).

Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.