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NOT SO BAD

ilene's picture




 

Lee Adler's analyses suggest that the recently reported retail sales numbers and initial unemployment claims are not that bad (but knowing Lee, there may be a big YET to add to the end.) ~ Ilene 

NOT SO BAD

Retail Sales Not Too Bad

Courtesy Lee Adler of the Wall Street Examiner 

While the media was trumpeting a miss on retail sales, the truth, as usual, was somewhat different than the media message. The major media outlets reported that a 0.1% gain missed analysts' consensus estimate of a gain of 0.3% for the month of December. As usual, the report was stated in seasonally adjusted terms, which often has nothing to do with reality. The reality is that retail sales were up by 15.7% month to month, and 6.2% year over year in December.

Before you say "Wow," take a deep breath. December is always up big versus November. That's why the economists apply a seasonal adjustment. The problem is that the adjustment may obscure what's really going on. That's why I look at total sales before adjustment and compare that to the month to month change in prior years. The December 2011 increase of 15.6% compares with 16.6% in December 2010 and 18% in December 2009. So it does show some slowing.

It's also important to adjust for changing price levels in order to see just how much of the year to year change is "real". Adjusted for inflation, the real gain in sales was only 2.3%, not 6.2%.

I like to subtract gasoline sales. Gas prices are volatile and gas sales account for nearly 10% of total retail sales. Big changes in gas prices can abnormally skew total sales in a counter trend way, because gas prices act more like a tax. While adding to total sales when gas prices have risen, that actually subtracts from discretionary spending and other retail sales. When gas prices have dropped, that reduces total sales but actually adds to discretionary spending and other retail sales. When gas price changes are small, the impact on overall sales trends isn't material, but large changes in gas price levels over time can create a false impression regarding total retail sales. Today's record level of nominal retail sales is not only a reflection of overall inflation, but is also partly an artifact of much higher gas prices. While total nominal gasoline sales are up by 35% in 5 years, unit sales volume of gasoline is actually down by 3%. The $11 billion per month increase that gasoline sales now add to total retail sales versus 5 years ago creates an illusion, both within the gas sales figure itself, and within total retail sales. By subtracting gas sales from total sales that counter trend influence is removed from the data.

Applying that adjustment to total sales, then adjusting for inflation, the year over year gain in retail sales was 2.4%. That compares with a gain of 2.6% in November. This is not a statistically significant change. Real sales ex gas are trending up at a modest rate. Nothing happened in December to change that one way or the other. The only reason that today's report was "disappointing" is that economists can't forecast accurately.

The impact of inflation and rising gas prices on retail sales can clearly be seen over the period of December 2006 to December 2011. Nominal retail sales have made record highs in each of the past 2 Decembers. Adjusted for inflation and ex gasoline sales, the gains are far more muted. On a nominal basis, retail sales peaked in December 2007. Real sales ex gasoline peaked in December 2006 and trended down until January 2009. They have now recovered to the December 2007 level, but remain below the December 2006 peak by 3.7%. The S&P was down 11.8% over the same time frame.

Real Retail Sales Ex Gasoline Chart- Click to enlarge

There is some correlation between the rate of change in retail sales ex gas and stock prices. The current annual growth rate of 2.4% is consistent with a flat to slowly rising stock market. As long as this growth rate indicator stays on the positive side, a bear market in stocks doesn't look likely. However, both the 2010 and 2011 stock market corrections did correspond with a sharp deceleration in this indicator. Both negative and positive divergences between the growth rate of real retail sales ex-gas and stock prices have also given useful signals. In other words, changes in this indicator often lead directional changes in the stock market. This is something to look out for in the months ahead.

 

Panic On Claims Not Supported

OK, so the market doesn't like the claims number, which missed analysts' estimates by a wide margin. Let's look at the facts.

Not seasonally adjusted, in other words, actual, claims rose by 102,000. Continuing claims wk ended 12/31 up by 361,000. However, before you get too excited, initial claims were better than last year when same week was up by 194,600. It was also way better than the 157,000  in 2010 and 225,000 in 2009. The continuing claims increase this year was about the same as last year. 2010 was much worse, at an increase of 520,000.

This seems like a not bad report, at least relative to last year. This week is the peak week for claims seasonally, and the trend is bullish with new claims declining at a faster rate than last year.

Initial Claims Chart- Click to enlarge

Continuing state and total claims continue to trend down at about the same rate as the 52 week moving average.

Continuing Unemployment Claims Chart - Click to enlarge

However, this chart, with continuing state and total claims on inverted scale vs. SPX suggests that there might be a problem, especially for stocks, in view of what looks like a trend break. The S&P tends to trend in the same direction as the inverted scale continuing claims.

Note: extended claims are a week behind state claims.

Continuing Claims vs. Stock Prices Chart- Click to enlarge

 
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Fri, 01/13/2012 - 16:22 | 2062928 therearetoomany...
therearetoomanyidiots's picture

This is crazy.

There may be some jobs, but they pay 8-10 dollars, max, no benefits, permanent on-call or temporary status. 

Has this guy gone shopping?   Here in SWFL, a pound of deli ham is 9.89.   Milk is 4 bucks, coffee, forget it.   Pnut Butter is close to 5 bucks for anything you should eat.   Property prices continue to tank.  

As noted above, and as posted on this website, actual employment for ages 16 and over is 58.5% - a 29 year low.  

It's not so bad a report if you are a) obama elite, b) wall st. fiend  c) independently wealthy.  

If you're middle class or lower - you're not doing too well.  

Let's have a war
So you can go and die!
Let's have a war!
We could all use the money!
Let's have a war!
We need the space!
Let's have a war!
Clean out this place!

Let's have a war!
Jack up the Dow Jones!
Let's have a war!
It can start in New Jersey!
Let's have a war!
Blame it on the middle-class!
Let's have a war!
We're like rats in a cage!

 

http://www.youtube.com/watch?v=Nd4o18Kqo1I

Fri, 01/13/2012 - 17:16 | 2063162 847328_3527
847328_3527's picture

Vanishing Middle Class (and MC consumer) was also a major factor in the decay and Fall of the Roman Empire according to the historian Boak. The Middle Class has been disappearing (fewer jobs, stganant wages, etc) for over a decade now and more rapidly recently.

Ex: Novarits to cut over 2,000 jobs in the USA.

http://www.dailyjobcuts.com/

Sat, 01/14/2012 - 12:09 | 2064549 therearetoomany...
therearetoomanyidiots's picture

Governmental and Business Elites and those that depend on them for their daily bread. 

Serfdom.

I can't believe Oblamer is going to be re-elected...we're going down hard.

Fri, 01/13/2012 - 15:53 | 2062818 Bill Lumbergh
Bill Lumbergh's picture

There is nothing wrong with analyzing the various data points but use caution in making conclusions.  Nowhere in this analysis is a chart displaying the percent of civilian workforce that is employed.  As we know the unemployment rate is calculated to exclude those unemployed for over a year yet still seeking work.  I have always theorized the unemployment rate will slowly come down since the number of people who can lose jobs is becoming smaller.  Needless to say the media will proclaim the unemployment rate is decreasing while more and more people are on food stamps.  The saying "figures don't lie, but liars figure" is quite appropriate.

Sat, 01/14/2012 - 00:13 | 2064114 StychoKiller
StychoKiller's picture

Was beginning to think you were swallowed up by cyberspace...

Fri, 01/13/2012 - 15:51 | 2062806 NEOSERF
NEOSERF's picture

Inflation vs. Lower real paychecks is starting to have an effect...coffee and a Sunday paper in Boston will set you back $6.  Cable, Internet and phone another $180...fine when things were good and you had some hope for higher standard of living in future years but people are taking a hard look at what is a necessity and what is frivolous...everything that can be eliminated from our budget is being cut out...not so much for worrying about current paychecks but more for the outlook of WHEN I will be forced to take retirement and the increasing liklihood of little government help.

Fri, 01/13/2012 - 15:28 | 2062714 Offtheradar
Offtheradar's picture

We don't even get the "Going Out Of Business" signs here.  You just show up one day to find the locks changed and a note thanking everybody for the umpteen years of patronage.

Fri, 01/13/2012 - 16:07 | 2062862 Shizzmoney
Shizzmoney's picture

This is DISASTEROUS to workers.  There was a bakery plant in Chicago where this happened, didn't give the employees 60 days and/or severance when canning them, only to rehire workers later as temps with no benefits.

This is why OWS and super liberals shit on businesses.  The accountability at the top of some of these companies have the moral compass of a limp cock.

Fri, 01/13/2012 - 16:56 | 2063056 ebworthen
ebworthen's picture

Back in the day I worked with an old guy who had worked his way up at Campbell (soup company). 

Had started on the assembly line as a kid, worked his way up to upper management before retiring well off.  We're talking late 1930's to late 1970's.

We sure lost that; employees now are like pocket tissues or plastic water bottles, disposable or maybe recyclable.

Fri, 01/13/2012 - 17:25 | 2063205 Banjo
Banjo's picture

Boo hoo you sold out so you could have cheap sweat labour baubles and talk about how the Bill Gates, Oprahs and other fat cats "took a risk" or "earned it" LOL

Enjoy :)

Fri, 01/13/2012 - 15:11 | 2062625 mirac
mirac's picture

I tend to like Lee's analysis/work, but there are a couple of questions regarding this article.  Firstly, what was the inflation numbers used to make adjustments.  Government figures or something like Shadowstats.com estimates.  Secondly, the correlation of comparable sales is scewed because of the payroll tax decrease that the American consumer received this year.  Drop that of at the end of February and we will probably see a major drop of of sales.

Also, gasoline sales have been trending down for the last little while, and I think it was Zero Hedge that reported that gasoline sales after Christmas were the lowest in a long time (not going to look it up right now, sorry).  The consumer is really tapped out!

And in retail, it's not how much you sell, but what are the margins.

Fri, 01/13/2012 - 15:10 | 2062621 docj
docj's picture

It's pretty telling that "gee, the numbers still suck but they don't suck as badly as they did last year" is the best the spin-monkies can come-up with... 2-full years after we've been told that The Great Recession was over.

Fri, 01/13/2012 - 15:02 | 2062591 Offtheradar
Offtheradar's picture

Down here in the Southeast, all's not well.  Many companies locally waited to see if christmas sales would improve before they pulled the plug.  Sales did'nt improve.  Closed shops.  Big and small.

Fri, 01/13/2012 - 15:14 | 2062639 ebworthen
ebworthen's picture

Local dollar store put up "Going Out of Business" sign 10 days ago, almost completely empty now.

Fri, 01/13/2012 - 15:41 | 2062761 bill1102inf
bill1102inf's picture

what town?

Fri, 01/13/2012 - 15:54 | 2062820 ebworthen
ebworthen's picture

Town in the Intermountain West with population ~125,000.

Fri, 01/13/2012 - 16:09 | 2062865 LawsofPhysics
LawsofPhysics's picture

If you are not close to any population centers, then you are actually in a better position than most.

Do NOT follow this link or you will be banned from the site!