Good Retail Sales -- or Bad?
The initial read on Retail sales was pretty good: The Commerce Department said Retail sales increased by 1.2% over October 2006 2007, and up a huge 6.3% from November 2006.
Year-over-year, Gasoline station sales were up 25% nonstore retailers (i.e., heating oil) were up 10.7%.
A likely source of sales gains? Inflation.
That's confirmed by the latest data from the Producer price index (PPI) -- it jumped 3.2% in November, according to the Labor Department. This represents the biggest one-month rise since August 1973. The ante has been upped for tomorrow's Consumer Price Index (CPI) at 8:30 am.
How did inflation impact sales? November gasoline-station sales increased by a whopping 6.8%, reflecting the increasing costs for energy and refined fuels. PPI release showed producer prices for energy swelled a record 14.1% last month versus October. Wholesale gasoline prices increased 34.8%. Prices of raw materials, known as crude goods, rose 8.7%
Non Gasoline sales at all retailers in November was a more modest increase of 0.6%.
But even that data point is suspect.
Why? The retailers themselves.
As the WSJ reported last week:
American consumers opened their wallets mostly on a need-to-buy basis last month, or when big sales lured them to the mall, bolstering concerns that the nation's retailers will need persistent discounting to move merchandise this holiday season.
While sales improved after two weak months, warnings from Target Inc. and others that business fell off sharply in the final week of November rattled many retail stocks . . .
The lackluster sales are another indicator that consumers may be slowing their spending after a multiyear binge fueled by cheap credit and a housing boom. Now, home prices are sliding in most markets, and banks have tightened lending standards."
So the question presented to you, the home viewer, is simply this: Who are you more likely to believe -- the retailers themselves, or the Commerce Department data?
>
Sources:
ADVANCE MONTHLY SALES FOR RETAIL TRADE AND FOOD SERVICES
Commerce Dept, NOVEMBER 2007
http://www.census.gov/svsd/www/retail.html
Producer Price Indexes - November 2007
DECEMBER 13, 2007
http://www.bls.gov/news.release/ppi.nr0.htm
Retail Chains Record Mixed Sales End-of-Month Downturn Portends Holiday Worries
MARY ELLEN LLOYD
WSJ, December 7, 2007; Page B4
http://online.wsj.com/article/SB119694357937215715.html
Retail Sales Suggest Economy May Be Stronger Than Expected
Wholesale Prices Surge on Energy
JEFF BATER and BRIAN BLACKSTONE
WSJ, December 13, 2007 9:14 a.m.
http://online.wsj.com/article/SB119755254588026485.html
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» Retail Sales Softer (Ignore the Surveys) from The Big Picture
If you want to know:- What people think, ask them questions. - What people are doing, look at the data. - What they are going to do, watch their behavior. That simple lesson gets lost in the various annual Holiday Shopping surveys. Each year, some grou... [Read More]
Tracked on Dec 17, 2007 8:43:16 AM
Comments
Get away car........hahahahahaha
Ciao
MS
Posted by: michael schumacher | Dec 13, 2007 11:03:37 AM
I wouldn't buy an auto now. Like most people I want to wait for more fuel efficient models. So.....
"Excluding gas and auto sectors, demand at other retailers last month increased by a robust 1.1%. "
Posted by: halbhh | Dec 13, 2007 11:09:54 AM
Who I'm more likely to believe: My own sense of timing. Consumers aren't that much less smart than you or I. They'll tend to use timing to get sales, etc. It's after the initial rush, and before the near Xmas rush. Ergo.... Let's not suppose we know more than we do.
Posted by: halbhh | Dec 13, 2007 11:15:37 AM
also remember that this november had an extra week after Black Friday of holiday shopping. If you look at Target's comps, this week added like 8 points to it's "reported" year over year gains. the adjusted gain was 1%
Posted by: joe | Dec 13, 2007 11:17:21 AM
< Who are you more likely to believe -- the retailers themselves, or the Commerce Department data? >
Commerce Department data cover much more other areas and data points.
Also, as someone else pointed out, there was an extra week in this year Thanks Giving.
Posted by: Sean | Dec 13, 2007 11:20:54 AM
Inflation EX-inflation now rising... as the Fed embarks on a rate cutting campaign.
Posted by: jw | Dec 13, 2007 11:28:02 AM
If the Commerce Dept. or any other Bush administration agency says anything at all, the opposite is true.
Period.
Posted by: John from Taos | Dec 13, 2007 11:44:47 AM
china has announced a "tight" monetary policy beginning in 2008. the gulf cooperation council composed of around 10 middle eastern oil producers with dollar pegs meets soon to discuss possible modifications to their currency regimens. inflation in all these parts is perceived to be unacceptably high. WILL FOREIGN DOLLAR HOLDERS FORCE THE FED TO BEHAVE RESPONSIBLY?? let's go f'in shopping while we await this verdict!
Posted by: ferd mertz | Dec 13, 2007 11:46:39 AM
wrong side of the trade Bury???
haha
Ciao
MS
Posted by: michael schumacher | Dec 13, 2007 11:51:00 AM
more loan troubles (not just single family housing) in paradise...printing presses running full boar...crash the dollar...bring on the Amero!:
TROUBLE IN TEXAS: Huge Multifamily Owner Nears Collapse
Apartment Giant MBS Cos. Goes Deep in Arrears on More Than $600 Million in Loans
MBS Cos., one of the largest multifamily property owners in the country, is delinquent, in default or in danger of becoming so, on more than $900 million in loans. For Michael B. Smuck (the MBS in the company name), that means he is in danger of seeing his apartment empire dissipate for the second time in his nearly 30-year real estate career.
Based in the New Orleans area, MBS Cos. owns and operates more than 65 apartment complexes totaling about 17,000 units - all in Texas.
Smuck's debt problems have been the subject of whispered conversations among financial firms and analysts for the past month as the extent of the company's financial problems slowly came to light. Those same financial analysts fear if MBS defaults, it could spell losses for many and affect property recovery operations, potentially for years to come. It will also generate a huge spike up in CMBS delinquencies, expected to be reported this week or next.
One Lender, Many Losers
PNC Financial Services Group originated almost all of the loans made to MBS Cos., about 90% of MBS's total loan exposure. Most of those loans are no longer on PNC's books because they were off-loaded into commercial mortgage backed securities (CMBS), which were then sold in the public markets and the risks spread to hundreds, if not thousands, of individual investors.
Still, PNC has filed at least one breach-of-contract suit in Louisiana's Eastern District federal court seeking $12.3 million in damages against Smuck and one his companies.
As of last month, Smuck-affiliated companies had as many as 65 other loans totaling more than $900 million spread across 36 CMBS deals. Most of the loans were taken out since 2000, some as recently as this year. Nearly two-thirds of those were reported to be at least 30 or more days delinquent, according to analysis last month by Roger V. Lehman and Julia Tcherkassova, CMBS strategists for Merrill Lynch. The delinquencies and defaults were expected to spread to the remaining loans.
To put that number in perspective, Fitch Ratings counted only $96.3 million in total delinquent multifamily loans across all CMBS deals in October. MBS Cos.' delinquent CMBS loans in November were already more than six times that amount, and could go as high as 10 times that amount. Multifamily delinquencies in Texas already account for more than half of all CMBS multifamily delinquencies. That figure could rise to more than 90%...
http://www.costar.com/News/Article.aspx?id=11557F6F1493470B369D4A04C9D98935
Posted by: BG | Dec 13, 2007 11:52:37 AM
I hope this doesn't sound like a stupid question, but...
If the fed cut rates two days ago, and wholesale inflation increased the most in 34 years, why is the US dollar index up over half a point this morning?????
/scratching head.
Posted by: Pool Shark | Dec 13, 2007 11:53:03 AM
People who are in the worst financial shape are spending what should be a credit card payment on dinner out, alcohol, toys and huge vehicles that are twice as big as they need.
They know they better live it up now before the credit cards are gone. But the credit cards just keep coming don't they?
Posted by: Bob A | Dec 13, 2007 11:56:41 AM
Oh! it is just oil. Nothing Fed can do to control what the evil oil producers or Chinese demand does. they should cut rates to help the economy through this....whine whine more whining. This is what is coming from the perpetual rate cut advocates.
The Fed can not hide from the fact that they caused the latest commodity price spike with their B-52 bombing style rate cuts in Sep. Check out the oil price. Popped up 35% since then. all commodities are similar. Not OPEC. This latest inflation spike is well and truly made in Washington DC, courtesy of B-52 Ben. Barry, you are one of the few highlighting this. Can we start worrying about what this is going to do in the longer term. I do not want to live through the 70s again. Please. This time around, there is no ambiguity. Fed is responsible for the inflation that we are witnessing right now.
Posted by: zao | Dec 13, 2007 11:56:41 AM
As someone pointed out in a comment thread on Calculated Risk (quoting from the November retail sales release), the retail sales data is adjusted for differences in trading days and holidays (but not for price changes).
I still think that the November retail data can not be seen as strong. And the first two weeks of December seem to have been abysmal. So unless the US consumer is waiting for the week before Xmas before opening his/her wallet, this is shaping-up to be a atrocious Xmas shopping season.
Posted by: Carlomagno | Dec 13, 2007 11:58:27 AM
I spelled an Indian name wrong . . . I am, therefore, the white devil.
Hard to argue with that logic!
Posted by: Barry Ritholtz | Dec 13, 2007 12:09:15 PM
pool shark - I'm the last person to hold myself out as a currency expert (though I did make a bit on it this year), but with the EUR taking the brunt of currency readjustment so far, and the European banks believed to be in as bad or worse shape than those in the US, it makes sense taht the dollar would fall a bit versus the euro, and by proxy versus the GBP.
But seeing falling risk appetite globally AND the dollar falling versus the franc and the yen, well, that has me scratching my head too. Dunno.
Posted by: ajw | Dec 13, 2007 12:22:57 PM
Pool Shark,
Tomorrow is currency futures/options expiration... that could be having some effect on the dollar. At 76.66, the USD is tapping the 50 dma from the underside. It's to be expected. Also, there is the possibility of a reverse head and shoulder's here, which could bring the dollar to 78, and it would still be in a downtrend on a yearly chart... of course, fundamentals are LOUSEY, but the market doesn't seem to care about fundamentals... yet.
Posted by: karen | Dec 13, 2007 12:30:07 PM
ack - I meant rise. Too much sleet, not enough coffee. Apologies.
Posted by: ajw | Dec 13, 2007 12:30:36 PM
Forgot who posted this thought but I totally subscribe to it:
paraphrasing so bear with me:
"Please keep shopping as I will be the one at the garage sales next year picking up what you fools bought at retail for half off"
Or words to that effect...
Ciao
MS
Posted by: michael schumacher | Dec 13, 2007 12:32:01 PM
Last night I picked up a pizza and overheard a conversation the owner was having with a supplier here in Las Vegas. The supplier said food sales as the casinos were down as were the restaurants she supplies and went into a brief summary how the housing downturn is causing problems and consumers are cutting back their purchases.
Let's see: Higher prices because we import more goods on a % basis and the dollar dropping along with lower consumer demand equals what? It used to be called stagflation but since the Keynesian Theory doesn't allow for it, it must not exist.
Phil-Las Vegas
Posted by: phil | Dec 13, 2007 12:32:48 PM
Pool Shark & commenters - take all the points of the replies. Makes sense. In addition a) there's been a lot of talk about a s.t. "bottoming" of the $ in the last two weeks (aside from our boy Nouriel who don't do short-term). And b)a lot of the differential was based on increasing interest rate differentials with the Fed cutting while ECB, et.al. were raising. Now they're holding, Bnk Of England cutting, and major world economies slowing it does look like that differential will be reduced somewhat. Bear in mind rate differentials are only a partial explanation. Check out Econbrowswer from time-to-time.
Posted by: dblwyo | Dec 13, 2007 12:37:49 PM
forgive me, pls. i meant LOUSY... i do have a dictionary!
so while i'm correcting myself, anyone read Quint Tatro's "Is this a bottom or a top?" at Minyanville?
http://www.minyanville.com/articles/MER-GS-WMT-TGT-HD-C/index/a/15198
Honestly, the guy drives me nucking futs! His comment,
"Well, everyone is convinced that because of all the problems we are facing the market must go down, all I am asking is, where would the market be if these problems weren't here? Would we be at this level or would be higher?"
My comment, it's the problems in the credit market, UNBRIDLED, UNREGULATED, OFF BALANCE SHEET, SUBPRIME/FRAUDULENT CREDIT CREATION that got us to the new highs in the dow and spx in the first place!
Posted by: karen | Dec 13, 2007 12:40:00 PM
Barry to your point the YoY% increase in gas station sales was 25%, clearly driven by the 34% PPI increases in large part.
That will displace consumer spending on "real" stuff and slowing consumer demand.
CalculatedRisk just put up his current MEW tables yesterday which are slowing but who's outlook is much more negative. Given the combination of a fast disappearing Housing ATM (remember that before the crisis) and a big chunk of the consumer budget going to eating and driving to work....
Posted by: dblwyo | Dec 13, 2007 12:40:42 PM
minyanville tries REALLY hard to paint themselves (not all of the contributors though) as middle of the road so that they do not take any one side of an issue. So as not to offend potential subs. They DID just license content to FBN so take that for what it's worth. Some of the writers try so hard to present a middle of the road picture (like Harrisons piece today) that does'nt ever really say anything it ends up being a waste of reading time.
too many people who call themselves financial journalists suffer from the "no se" syndrome.....
Teaching kids about finance is good stuff however they are missing some tanglible things that are going on simply because they do not want to offend anyone.
Ciao
MS
Posted by: michael schumacher | Dec 13, 2007 12:48:05 PM
AP 'wholesale inflation skyrockets. Sales up' Duh! Occam's razor
Posted by: Ross | Dec 13, 2007 12:49:34 PM
