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Is Retail Recovering Or Is It Just Inflation?
A lot of economic reports came out in the past several days but the two data that caught my eye were industrial production and business inventories. Industrial production fell 0.2% in September, which was the fourth month of decline and went into negative territory for the first time since June of 2009. Economists at the Fed have been keeping a close eye on industrial production because manufacturing has been, according to them, leading us out of recession. The negative trend is troubling to the Fed.
Yet business inventories increased 0.6% in August, the fourth month of such increases:
As the chart shows, inventories rise during economic decline as businesses see less demand for goods. This chart shows the immediate impact of the October 2008 panic as retailers and wholesalers were stuck with high inventories because of declining sales (see next chart) and had to clear them out. It took almost a year to get back to a "normal" inventories-to-sales ratio. In fact inventories got tight as businesses kept inventories lean, unsure of the future. This current increase in inventories may be a healthy trend because it indicates a willingness of retailers to hold on to inventory in anticipation of rising sales. And that's what retail sales have been doing.
Retail sales in September were up 0.6% and August sales were revised upward from 0.4% to 0.7%:
According the reports, sales were broadly based, even without including auto sales (up 0.4%). On a YoY basis, sales were up 7.3%. These numbers are confirmed by the weekly retail reports from Redbook and ICSC. And it can't be attributed to spending from savings withdrawals, since the latest saving rate data was up a bit to 5.8% (August). Reports are that many sales are driven by markdowns. It is too soon to call this a trend, but increased spending, a modest inventory buildup, and increased savings are positive signs. While this sales spike looks good on the chart, keep in mind that the actual rates of monthly change are small.
What is curious about the retail numbers is that consumers remain rather pessimistic about the future. The U of Michigan Consumer sentiment report turned down again for the fourth straight month as of mid-October (67.9 in October vs. 68.2 in September):
One way to explain retail sales versus consumer sentiment is to write off sales as just inflationary increases. The CPI report for September came out positive 0.1% (far below the Fed's goal of 2%+), with YoY price increases at 1.1%:
But, I think much of the retail sales gains are real--for now.
What we need to watch is the impact of the devalued dollar on exports. One would expect multinationals to increase sales as US goods appear cheaper to our trading partners. US exports have been flat for the past three months, still down 10% on dollar volume from the pre-crash peak:
I think these numbers are reflected in the decline in industrial activity noted above. Industrial activity has been driven by the multinationals. There is no question that there will be further pressure on the dollar as quantitative easing, or money printing, by the Fed eventually creates inflation. That will give exports a boost. But the other side of that coin is that it will make imports more expensive and that will hit the consumer at the Wal-Mart level. As prices of imports rise, my guess is that retail sales will cool off but it will be difficult to distinguish with ongoing price inflation.
We need to watch money supply as price inflation goals targeted by the Fed through its QE program will show up in these charts. It appears that Austrian Money Supply* measures are already increasing:
*Also called True Money Supply, or TMS1 and TMS2. For definitions of TMS, see here.
When money supply inflation takes off then I would expect another business cycle to form. The problem is that because we have not laid the proper building blocks for an economic recovery, economic activity will stagnate and we will have price inflation at the same time. As I have noted, price inflation is a false prosperity, an illusion of activity, which reveals that prices are rising, not wealth.
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If you look at the numbers from the census, most of the drivers are grocery and specialty retail in high velocity items. Department stores and durable goods retail is getting completely crushed. Pretty much mirrors the price hike in high velocity essentials and the price drop in non-essentials/durable assets throughout the economy.
http://www.census.gov/retail/
It is so obvious that this is a great depression and a systemic crisis to boot that anyone who interprets otherwise has their head in the ground or other dark place. Occams razor applies. Inflation, spending from not paying mortgages, loans from retirement accounts and partying as our known world dissolves is a much better explanation for these statistics.... and, are these numbers even statistically significant? Or is it like reading a 9 a.m. Kitco headline like ¨Gold sells oft due to profit taking¨ when an hour later gold has risen in terms of fiat toilet paper.
Well.. if you focus on the City of New York. No inflation exists. No fooling. Retail is up and taxes have been reduced. Honestly, the MSM told me so. LOL
http://www.tax.state.ny.us/pubs_and_bulls/publications/sales_pubs.htm
My favorite marxist baiting effort to spin retail sales figures during a Santa Claus market rally.
Sales and Use Tax Rates On Clothing and Footwear
http://www.tax.state.ny.us/pdf/publications/sales/pub718c.pdf
Enjoy
I spend 1/10 th of what I used too. If retail is picking up, someone has to make up allot for people like me.
How this for a mind fuck.
1. FED QE2 TARP ~ Early November real possibility civil war or at least the first shots; what ever they might be; legal or literal. Your guess is as good as mine. Plus lie about depth of crisis to the population; plus follow a path of monetary expansion to compensate for budget shortfalls.
2. UK Budgets - Late October, riots to begin soon
3. French riots in response to budgets and lies about the real depth of the problem
4. Greece, Portugal, etc...riots and lie about real depth of prolem
5. Peripheral nations such as Iraq, Iran, hurt way more economically than the west and civil unrest is likely soon.
Folks, this is a planned response to the stock market crash a few years ago. What is the best way of achieving 100 percent success? try both keynesian and Austrian school solutions at the same time. Which ever one works; the western world defaults to immediately.
How this for a mind fuck.
1. FED QE2 TARP ~ Early November real possibility civil war or at least the first shots; what ever they might be; legal or literal. Your guess is as good as mine. Plus lie about depth of crisis to the population; plus follow a path of monetary expansion to compensate for budget shortfalls.
2. UK Budgets - Late October, riots to begin soon
3. French riots in response to budgets and lies about the real depth of the problem
4. Greece, Portugal, etc...riots and lie about real depth of prolem
5. Peripheral nations such as Iraq, Iran, hurt way more economically than the west and civil unrest is likely soon.
Folks, this is a planned response to the stock market crash a few years ago. What is the best way of achieving 100 percent success? try both keynesian and Austrian school solutions at the same time. Which ever one works; the western world defaults to immediately.
It doesn't make any sense - too poorly written to qualify as any type of fuck except for the fact that you should default on any outstanding student loans you have. Clearly, you got ripped off.
I don't always buy, but when I do, I buy Dos Equis.
Stay thirsty my friends.
That would be people who are not paying their mortgage (living for free during foreclosure) buying stuff.
Pretend your mortgage or rent went away for a year... or even 2 years.
How much extra money would you have?
BUT...
Would you feel very good about spending it? Knowing that time was limited until you had to start shelling out for living expenses again?
TA DA!!!
The current environment.
If sales and inventory are up but production is down, then doesn't that mean the production was done overseas?
I've been a sole proprieter for ten years. 2008 was the last nail in my coffin. I had to make an unneeded inventory purchase of paper rolls for printers b/c the price was going up from the papermills. That was the only reason I bought any inventory. No expectation of increased sales. Just to keep going a little longer.
Withe the loss of business and income, I just spend my time enjoying myself for awhile and doing things I want to do.
It is funny how gov't retail sales figures include fuel sales ....but gov't inflation figures don't include fuel.
Could we get those numbers in constant dollar, seasonally adjusted, apples to doughnuts terms (as reported by the Bureau of Lies and Statistics) ?
Because, if not, I'm tempted to think that :
(reduced production + increased inventory) = (lots of shit not selling)
But hey, I'm just a dumb-ass Engineer. Been wrong a lot.
same price and less quantity = inflation
Half gallon of ice cream in now less than half gallon, but no price change
Yeah, WTF? Everything I buy now comes in bigger boxes and the price is jacked up---but those more expensive jumbo boxes are now half empty!
It is all BS. This shit aint nuttin but a pyramid scam. I aint buy'n nuttin.
Right about the BS. Data points, no matter how accurate, matter to no one but statistical junkies.
There has been so little correspondence to data in the last two years that anyone who uses it to make decisions about what to do is likely insane.
The information contained in data points has already been seen by those who move markets. By the time we get them, the cognoscenti are already positioned to have profited from their knowledge.
you need to check out this site....it's all smoke and mirrors coupled with inflation!
http://www.consumerindexes.com/
i am a consumer metrics junkie but the lack of follow through in the real economy is starting to concern me. i am trusting consumer metrics less and less each day.
is it possible that the 2008 swoon was merely coincidental?
they are predicting -6% GDP for Q4 or Q1 2011 at the latest. i just don't see it right now. yes, economic releases are weakening but not as much as they SHOULD be and that concerns the hell out of me.
the ISM number in two weeks will be a huge event as far as Consumer Metrics is concerned.
When I buy, I look for deals on Ebay....Maybe that's why ebay is doing so well after hours today.....
...me too....I buy all my expensive riflescopes on eBay...there are some great deals to be had on the top of the line stuff that folks are being forced to sell. Ditto on guns at GunBroker...many fine Coopers offered at very good prices. If you are looking for a 'heritage' rifle now is a good time, even though in general gun prices have been going up the last 5 years.Maybe some folks are aprting with a bolt action Cooper to buy an assault rifle? I know the sales of all the AR's are just off the charts and the prices are silly. Personally, I do not own or collect any type of military guns, but I sure see them at the range and most often the shooters are pretty good, even more surprisingly.
I also wonder how collectibles are doing especially on eBay.
Retail sales have made improvement. Hard to believe, but much of it is a flight to quality, pent up demand for necessities and non payments on loans being used elsewhere. Flight to quality is a biggy. I sell expensive artwork. It's moving very well at big discount but only good names with excellent auction records.