Retails sales last month rose 0.3%, the Census Bureau reported this morning. That’s an upside surprise compared to the consensus outlook, which predicted a 0.3% fall. So much for the idea that snow can keep consumers away from the malls, even if the weather was blamed for pinching the labor market last month.

In matters of consumption, February’s gain marks the second month of modest gain. Over the past 12 months, retail sales are up a respectable 3.9%. The recovery in consumption, it seems, is humming along nicely. And so it is, as long as you don’t search for too much perspective.
Much depends on how we crunch the numbers. If we look at the trend in actual retail dollars spent on a monthly basis (seasonally adjusted), the trend looks clear. As our first chart below shows, Joe Sixpack is spending considerably more than he was a year ago.

But if we’re looking for big-picture trends as it relates to the economic cycle, we need to look at more than just month-by-month dollar comparisons. Monthly percentage change is one option, although there’s quite a bit of statistical noise here. Looking at rolling 12-month percentage change helps filter out some of the noise and focus on the broad trend, many economists advise. This is no silver bullet, nor is any other lone piece of data. But as economist Joseph Ellis outlines in Ahead of the Curve: A Commonsense Guide to Forecasting Business and Market Cycles, it’s all about finding context. Looking at key economic variables with some perspective helps. With that in mind, consider our second chart below, which graphs retail sales on a year-over-year basis.

Clearly, retail sales have recovered on a percentage basis from the Great Recession. That’s not surprising, given the enormous monetary and fiscal stimulus over the past year. The challenge will be one of keeping the rebound intact. On that note, the modest slippage in the 12-month pace of change in recent months may be simply random behavior. But given the economic context of late, perhaps there’s something more ominous lurking in the trend. We simply don’t know. It all depends on how consumers act in the months ahead, and to some extent that will depend on the labor market.
“While we are not expecting the consumer to come roaring back in the near-term, improvements have been quicker than expected considering the still-distressed state of the labor market,” according to Adam York, an economist for Wells Fargo Securities, via MarketWatch.com.
It’s still all about jobs, jobs, jobs, even if today’s it’s about conspicuous consumption.