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Here are some quick data points around inflation in May that will put yesterday’s retail sales report into the proper perspective:

• The Consumer Price Index increased by 0.6% last month and was up 4.2% on a YoY basis.
• Gasoline Prices rose 5.2% compared to April and were up 21% on a YoY basis
• Food Prices rose 5% on a YoY basis
• Import prices rose by 2.3% in May, 17.8% on a YoY basis
• Retail sales were up by 1.0% in May and by 0.8% if you exclude gasoline purchases (on a nominal basis). However removing gasoline sales doesn’t really remove the impact of higher gas prices, as higher shipping costs can impact the prices of the majority of the goods we buy

In other words even when using the Fed’s inflation ex-inflation number retail sales aren’t outpacing inflation, and when you consider the real inflation people are paying the YoY change is even more negative. How much longer are the media (and arguably the market) going to ignore the inflationary component of retail sales?

At this point the YoY revenue changes are irrelevant, and the only significant numbers are the YoY change in earnings.  From this investor’s perspective I don’t care if a retailer brings in more revenue, only if it’s finding a way to generate more profits in the current economic environment.

Sources:

The NY Times: “Oil and Food Push Consumer Prices Higher in May” – Michael M. Grynbaum, June 14, 2008.