Retail Sales Show Inflation, Not Growth
If you ever doubt the significance of the market's relative overbought/sold condition to news, the past two days have been quite instructive. Look at yesterday's ripper on the Buffett muni bond news (the Ambacs (ABK) of the world ended the day lower), and today's response to what was an easily parsed weak Retail Sales data show that its the environmental market conditions the news enters, and not necessarily the news itself, that matters most.
Consider:
"The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for January, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $382.9 billion, an increase of 0.3 percent (±0.5%)* from the previous month and 3.9 percent (±0.7%) above January 2007."
Not for price changes means that these are nominal -- not inflation adjusted -- numbers.
Hence, with Gasoline station sales up 23%, and non-store retailers (home oil delivery) up 10.6%, the surprise gains were all energy/inflation related.
I have to wonder about the boost in demand for cars, considering what we have heard from all the auto makers -- they almost across the board announced weaker sales. I don't know what the Commerce department is looking at, but I cannot figure how its a positive sign for the economy.
Take the Retail Sales EX Inflation (gasoline, food & beverage) and retail sales were DOWN. Excluding inflation, demand at all other retailers last month were unchanged to negative. Economically, speaking, how bullish is that?
Chart courtesy of Barron's Econoday
>
Sources:
ADVANCE MONTHLY SALES FOR RETAIL TRADE AND FOOD SERVICES
JANUARY 2008
WEDNESDAY, FEBRUARY 13, 2008 AT 8:30 A.M. EST
Commerce Dept, Service Sector Statistics Division
http://www.census.gov/svsd/www/retail.html
U.S. Retail Sales Unexpectedly Rose 0.3% in January
Shobhana Chandra
Bloomberg, Feb. 13 2008
http://www.bloomberg.com/apps/news?pid=20601087&sid=am.WFHwnr_5s&
Wednesday, February 13, 2008 | 10:00 AM | Permalink
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» Real Retail Sales Fall to 2003 Levels from The Big Picture
Yesterday, we noted that the market wanted to rally, courtesy of its oversold condition. Dropping nearly 5% in the previous week does that to traders. However, there is no need to tilt against windmills -- be it Buffett's Muni bond grab or yesterday's ... [Read More]
Tracked on Feb 14, 2008 6:34:06 AM
» Pay More, Get Less from The Big Picture
Earlier this week, we noted a deceptive rise in Retail Sales that was driven by price increases, not sales gains. Measured in Real terms, the inflation adjusted change in year over year sales actually dropped back to levels not seen since 2003. The NYT... [Read More]
Tracked on Feb 16, 2008 9:16:51 AM
Comments
today's a big rally day. bull market's back. with strong retail sales like this, it's obvious the economic fundamentals are strong and the crisis is behind us.
at least, that's what TV told me today.
Posted by: crgj | Feb 13, 2008 11:38:13 AM
The rallies yesterday and today make me think that the folks on Wall Street are more economically illiterate than my barber from the Ukraine.
Posted by: edhopper | Feb 13, 2008 11:44:03 AM
BR-
Isn't painfully obvious to you what was done with the auto #'s??.
They didn't like them and in true neo-con fashion have decided to "make nice" with them. This is consistent with the BLS and it's fantasy-like projections as well.
Simply stating that "I don't know what they are looking at" is too easy. You took Stein to task......
Ciao
MS
You know they made them up.....call it a spade.
Posted by: michael schumacher | Feb 13, 2008 11:45:28 AM
Hope persists, for now.
Posted by: Mike M | Feb 13, 2008 11:53:28 AM
At our local supermarket (Hannaford), prices on a lot of products were increased right after New Year's. If other supermarket chains made a similar pricing move in early January, you would expect to see something like the increase for retail food sales that the report shows.
Posted by: Doug Watts | Feb 13, 2008 11:54:24 AM
More trenchant analysis. Big Picture has the de-fogger on full power.
This is stagflation. In the blog battle between inflationistas and deflationistas that observation makes no friends. But that is what it is. And there are more geopolitical shoes to drop. CIA is having a busy 2008.
Posted by: Roger Thatchery | Feb 13, 2008 12:02:00 PM
What the up tick in demand for cars? Easy. Sell your house, buy a car and live in that instead.
Posted by: SethDavis | Feb 13, 2008 12:02:24 PM
Spin much, Reuters:
WASHINGTON (Reuters) - An unexpected rise in January retail sales, reported by the government on Wednesday, fired up hopes the U.S. economy might skirt recession despite the pressure on consumers from a weakening housing market.
10 grafs down we are told:
Gasoline sales rose 2 percent in January after being flat in December, but analysts said that likely reflected higher prices, not stronger demand. Excluding gasoline, January retail sales rose 0.1 percent.
Never mind.
Posted by: Doug Watts | Feb 13, 2008 12:05:43 PM
What the up tick in demand for cars? Easy. Sell your house, buy a car and live in that instead.
---
Or A Van Down By The River !!!
http://www.youtube.com/watch?v=lFPp5WfE-Yg
Posted by: Doug Watts | Feb 13, 2008 12:08:40 PM
I enjoy watching this play out. We are so smart and have such a deep understanding of the economic conditions that are impacting us.
This reminds of the long summer nights in the early 80's sitting in the backyard of my friend's house drinking 3.2 beer because we were an 18 state at the time.
We would laugh at the bug zapper because the insects just could not resist "the pretty light". Why do I get the feeling that the masses are watching the "pretty light" and not paying attention to the fact that we are about ready to get our asses zapped. The difference for me now versus then, I drink whiskey straight, it numbs a lot faster.
Posted by: JST | Feb 13, 2008 12:14:55 PM
Auto sales. If the data is from actual dealer sales and state registrations, I'll accept it.
In Texas, we tax inventories at the end of December. A dealer friend suggests that dealers run down inventory at the end of the year and restock in January.
Edhopper, you have a barber from Ukraina? Vo kak. Funny that's where my Marlboros are shipped from.
Posted by: Ross | Feb 13, 2008 12:16:49 PM
So...are you saying that retail sales ex-retail sales are down, then??
(just kiddin', but kind stabbed yourself there)
Posted by: raft | Feb 13, 2008 12:20:38 PM
We just bought a car.
Used, a 2005. Don't think that will help the auto makers much, but the car dealer was kinda happy.
Posted by: donna | Feb 13, 2008 12:22:00 PM
The National Retail Federation, which has some skin in the game, headlined the report as "Jan. Retail Sales Show Consumers Spending on Essentials". Discretionary spending is flat in nominal terms, and likely negative in real terms.
That's all that really needs to be said. Not sure why the media didn't.
Posted by: E | Feb 13, 2008 12:23:46 PM
Not to worry. When you are liquidating credit faster than it can be originated, you are entering a deflationary spiral.
Inflation is a mute point. The things we really need are inelastic. It's a strictly a supply demand issue. The things we formally wanted are already deflating.
Posted by: SPECTRE of Deflation | Feb 13, 2008 12:24:20 PM
Barry, thanks for the link to the Census Bureau press release. Usually that kind of background info is merely useful. But today, all the media misreported the story. So, in this story being able to look at the words from the Census Bureau was important, because when the whole market says one thing and one person says something else, you gotta wonder. As jaded as I am, the media astound me today. Congratulations on being smart and thanks for blogging real info and good insight.
Tim Mooney
Posted by: Tim Mooney | Feb 13, 2008 12:24:59 PM
Kudlow formally capitulated on the recession argument yesterday. That's probably why the markets are up.
Posted by: E | Feb 13, 2008 12:25:44 PM
We've seen it before: get the good numbers in the headline, then later quietly slip the downward revision onto page 8.
Posted by: zero529 | Feb 13, 2008 12:27:10 PM
Spin much, AP ?:
---
By Martin Crutsinger, AP Economics Writer
Retail Sales Post Surprising Rebound in January Following Dismal December
WASHINGTON (AP) -- Shoppers put aside worries about the slumping economy to go to the malls and auto dealerships in January. That propelled retail sales to a surprising rebound following a dismal December.
---
And then, at the very bottom of the story, we are finally told:
Sales at gasoline stations were up 2 percent, the biggest rise since November, and a gain that reflected higher pump prices. The retail sales figures are not adjusted for price changes.
Excluding gasoline, retail sales rose a more modest 0.1 percent in January, and excluding autos, sales were up 0.3 percent.
Clothing stores saw an increase of 1.4 percent but general merchandise stores, the category that includes department stores and big chains such as Wal-Mart, saw a tiny increase of 0.1 percent.
Sales fell at a number of establishments including furniture stores, electronics stores, hardware stores and sporting goods stores.
Posted by: Doug Watts | Feb 13, 2008 12:50:47 PM
Auto sale volume was down 6.2% from 16.2 million units (SAAR) December to 15.2 million units in January. Retail sales were up 0.7%.
So car prices were up 6.9% in one month, that's about a 125% annual rate, what's not to like ?
I can't figure out the gasoline sales, according to all the weekly data I can find gas prices were cheaper in Jan then Dec, so inflation doesn't explain the 2% rise.
Posted by: Michael Donnelly | Feb 13, 2008 1:29:27 PM
Spoke to my contact in credit trading at MER today:
"Dave, what are you hearing in the ARS market today? Just wondering if today is anything like yesterday?"
"Vega, this market is shutting down."
Posted by: Vega | Feb 13, 2008 1:30:08 PM
The car sales were prably due to all those Mexican const workers buying vans for the trip back to Durango, etc.
In other news car sales are so good that Toyota is coming out with an 84 month loan.
Posted by: larry | Feb 13, 2008 1:36:59 PM
My question is: why does the media spin what they know not to be true? What incentive do they have to knowingly mislead people about facts they themselves have?
I'm not a conspiracy nutcase, but they obviously have something in it to try and deceive people.
Posted by: crgj | Feb 13, 2008 1:45:42 PM
cinefoz said you'd do this, BR. Y'know, spin the headline negatively.
Why are you letting facts get in the way of his theory that All Is Well?
Posted by: Mr. Obvious | Feb 13, 2008 2:04:37 PM
These car sales numbers alarm me. We have a looming parallel lending fraud problem in the auto loan market, and NO ONE has put the brakes on it. I flipped on the teevee for a mere ten minutes last night and saw two "we'll approve any car loan--badcredit!nocredit!foreclosed!dead!" ads. Will the madness never stop?
Posted by: Emmi | Feb 13, 2008 3:13:43 PM
