The retail sales number released by statistics Canada this morning are not dismal but they are bad as in retail sales are down by -0.1% on a month over month basis (M/M). On a year over year (Y/Y) basis retail sales are up by a respectful 3.3%. For the present it is very much an open question as to how retail sales will finish the year.
However, if we take a look at a bar graph of retail sales what I find interesting is that public consumption, by which I mean personal consumption that directly projects a public image, although softening is nonetheless for the most part still solid. And this holds across durability categories. So for example auto sales are still relatively strong and so are clothing sales. What has dropped off and gone into negative territory is private consumption by which I mean personal consumption that the public do not necessarily see. So for example, while car sales are strong, parts are down; while home sales are still positive, home furnishing is negative; and while cloths are positive personal health products are down. In short, Canadian consumers are maintaining appearances while cutting back on those items that do not deliver the highest social bang for the buck.
In Thorstein Veblen’s theory conspicuous consumption the luxury end of public goods is the driver in booms. The more ostentatious displays of wealth the better: Jewellery ect. But that end of public consumption has gone negative. In short the status war aspect of public consumption has ended and now appearances are being maintained through cuts in other areas of consumption.
If this trend is at all robust; i.e., if it continues into the August and September numbers than we could well be seeing the end of consumption as an economic driver.