After two successive months of contraction in retail sales (in real terms), April’s estimated balance was a bounce higher. Given the volatile nature of economic data, this upward move is not unexpected. Total retail sales (including food, autos and gasoline) grew 4.5% in April 2013 Y/Y, much better than the 0.98% and 1.95% in February and March, respectively.

Despite that bounce, however, even the 4.5% pace is still well below what should be seen in a solid growth period (particularly since these figures are not adjusted for any measure of inflation). April’s growth is still in the lower range trend consistent with what we have seen since the early months of last year.

ABOOK May 2013 Retail Sales Longer Comp

Taken in the context of the recovery period itself, the downward trend established in 2012 remains fully intact even with April’s snapback.

ABOOK May 2013 Retail Sales Recovery Period

Again, the volatility is typical as the ebb and flow of month to month changes are normally defined within a cyclical trend. Going back further, we can see the cyclical trends change quite clearly.

ABOOK May 2013 Retail Sales Nonseasonal Trend

Growth periods last several years in which the volatility revolves around a central tendency defined by either growth or contraction. This is largely the basis for seasonal adjustments and trend-cycle analysis, except modern statistical agencies seek to define the trend first and then revisit only after official acceptance of a cycle change.

For the retail sales series, recessions/cycle changes are clearly pronounced in the unadjusted data. Particular periods of oncoming contraction show up in years where the previous cycle trend conspicuously fails to hold (such as late 2000/early 2001, late 2007/early 2008).

Given that we have now in 2013 two “good” months (January & April) of retail sales balanced against two “bad” months (February & March), we can measure the sum and strip out the volatility against previous cycle levels. Going back three decades, the trend in 2013 is obviously more consistent with contraction than growth.

ABOOK May 2013 Retail Sales Jan-Apr YTD

For the first four months of 2013, the growth rate is less than half of what was seen over the same period in 2012, equivalent to the beginning of 2008.

The above figures include autos in their calculations and thereby include the Fed’s intended impacts on credit availability and usage. Despite that, the results are not impressive. However, removing autos we see the bifurcated economy far more clearly. In this context, the April bounce is clearly well behind volatility of even early 2012, representing another downshift in consumer spending apart from monetary policy “benevolence”.

ABOOK May 2013 Retail Sales ex autos

The downgraded growth in 2012 has clearly been downgraded again in 2013 to what appears to be the next cyclical stage. It simply confirms that consumer spending, volatility and all, is projecting lower. Unless monetary policy suddenly becomes far more effective at pushing households into more debt, the fragmentation in economic structure will likely continue to push results lower over time.  This tiered economic structure, I believe, explains the shallow slope downward in cycle (where the onset of recession is typically associated with a sharp drop in output and activity).

While the total economic dislocation in 2008-09 represented a paradigm shift in economic organization (away from debt and back toward incomes), the overall cycle of boom/bust within that structural change remains. Regardless of month to month volatility, there really is not much ambiguity about where in the cycle we are.