Be Thankful But Study What Happened

With the consumption data released today--the day before Thanksgiving--we are reminded to give thanks that retail sales are at least growing not declining sharply as they were a year ago. But what was it really like out there day-by-day in the shopping centers a year ago? How rapidly were sales declining? And what did it have to do with what was happening on Wall Street? To answer these questions, I examined daily retail sales from Target stores in the weeks before Thanksgivng last year. The data were provided to me courtesy of the Target Corporation.

Daily sales are hard to analyze because they jump around so much and because there are stong seasonals and huge within-week variations as you can see in the first chart showing sales at Target stores around the country. But after adjusting the data for these factors one can see more clearly what was happening as shown in the adjusted data in the second chart. The details of how you get from the first chart to the second chart are in my note Analysis of Daily Sales Data during the Financial Panic of 2008. As shown in the second chart, daily sales had been declining in the summer of 2008 compared to 2007, as the recession began in late 2007. But there was a noticeable acceleration in the decline from September to November 2008. The acceleration appeared to start before the Lehman bankruptcy on September 15, and there was no noticeable effect at the time of that bankruptcy or shortly thereafter. It was not until a week later that sales really began their precipitous decline in panic-like fashion that paralleled the panic in the financial markets. This was during the chaotic period that various government responses were being proposed, debated, criticized, and implemented, suggesting that these responses were themselves a factor. However, it is difficult to find a negative impact on sales of single events or dates during the panic. Rather there appears to have been a more cumulative, yet still very sharp, negative impact