U.S. Retail Sector Begins Massive Collapse

Sprott Money's picture

 

 

.................Jeff Nielson for Sprott Money

 

 

The quick-and-easy way to categorize the retail sector of the U.S. economy would be to use the metaphor of “falling off a cliff”. However, such a characterization would be overly simplistic. A more accurate analogy would be to consider someone sliding halfway down the side of a mountain – and then falling off a cliff. This represents the retail sector of the largest “consumer economy” the world has ever seen.

 

 

As explained previously; a “consumer economy” is (by definition) a dying economy. Consumption is not an activity which contributes to the productivity of any nation. Rather, “consumption” is our means of harvesting the fruits of previous labours. As a matter of elementary logic; such “harvesting” cannot continue over any extended period, or one will simply run out of anything to harvest.

 

 

At that point; the consumer economy becomes a debtor economy, meaning a Deadbeat Economy, since it now lacks the productive capacity to pay for what it consumes. Our economies have become a cartoon, and our governments have become a Cartoon Character, specifically Wimpy, from the old “Popeye” cartoons.

 

 

“I’ll pay you on Tuesday for a hamburger today.”

 

 

Children laugh at the cartoon, because everyone knows that Wimpy can never pay for the hamburger on “Tuesday”, but rather when it comes time to pay for his consumption he will simply seek to do more mooching. That is the “consumer economy”. That is the U.S. economy.

 

 

But as with the mooching of any Deadbeat; at some point such reckless irresponsibility must come to an end. At some point; all the mooching, and all the lies about “paying” for the mooching will come to an end, because those in possession of wealth will simply refuse to surrender any more of it to the Deadbeat. That is the U.S. consumer economy today.

 

 

The U.S. retail sector has been “sliding down the mountain” for many years now, although the rate of this slide has dramatically accelerated since the Crash of ’08, and the mythical “U.S. recovery”. Three million less people are now working in the U.S. since the “recovery” began. Gasoline consumption has plummeted by 60% since the “recovery” began.

 

 

Then there is the train-wreck we know as the U.S. retail sector. Here the economic lies are especially transparent, as has been explained in many previous commentaries. The principle means by which the economic lies of (in particular) the U.S. government seem to indicate “growth” in the retail sector is that the lies never account for inflation.

 

 

In the real world; inflation is 10+% every year. Thus when attempting to “measure” consumptionrevenues in the retail sector (which is all that our governments ever measure), revenues will increase by 10+% from inflation alone. If inflation is not “subtracted” out of this calculation, then we are not measuring any change (rise or fall) in retail sales.

 

 

Rather, what is being measured is the change in retail sales plus the rate of inflation. Since we only want to know the change in retail sales, and since subtracting inflation from this calculation is so simple a ten-year-old child could do it; the fact that our governments refuse to remove inflation from this statistic is proof their “statistics” here are deliberate lies, specifically a statistic which exaggerates the level of economic activity in the retail sector by the full rate of inflation.

 

 

 

What happens when we do subtract inflation, and then calculate U.S. retail sales? As has been frequently observed, once inflation is subtracted in order to create a meaningful calculation; we see that U.S. retail sales have been falling every year. Indeed, sales have been falling in nearly every month of every year.

 

 

It is after years and years of such sliding that we now observe the latest massacre in the U.S. retail sector. It began with the ever-important U.S. “Black Friday” shopping weekend. Factoring inflation into the calculation; 2014 U.S. “Black Friday” shopping plummeted by over 20% year-over-year.

 

 

Note also that all of these annual plunges in U.S. consumption are cumulative. Since the “U.S. recovery” was proclaimed into existence; the U.S. retail sector is now only selling about half as many goods as when this pseudo-recovery began. What does it mean when a consumer economy (i.e. a dying economy) is only selling half as many goods as previously? Death is very near.

 

 

Further indications that the U.S. retail sector has begun a collective ‘cardiac arrest’ come from the disastrous post-Black Friday numbers from the U.S. What happened after the Black Friday Massacre? U.S. retail sales suffered their largest month-over-month plunge since January of 2014. Officially, U.S. retail sales plunged by 0.9% in December.

 

 

Three observations need to be made, in order to translate this statistic into reality. First (as always), the “official” number does not subtract inflation. Once we do so; the “0.9%” drop becomes roughly a 2% drop. Secondly, we are used to seeing most of our statistics expressed as annualized numbers. When we take the 2% drop in December sales (over just one month) and “annualize” it, we see that U.S. retail sales in December fell at an annualized rate of approximately 25%.

 

 

Obviously, there is a humungous difference between the “official” 0.9% drop reported by the propaganda machine, and the (annualized) 25% collapse which actually took place last month. But we’re still not finished. As just noted; all of these plunges in U.S. consumer spending are cumulative.

 

 

What we must also factor into the catastrophic number reported for December, the ultra-important “holiday shopping season”, is that the December collapse is cumulative with the collapse we saw in November (and “Black Friday”). Thus after the 2014 Black Friday Massacre, we see an additional 25% plunge in U.S. retail sales.

 

 

To further put this into context; this horrific collapse comes immediately after the U.S. government has reported what it claims were the two “strongest” quarters of “economic growth” in 12 years. Is it possible that a consumer economy could suffer a massive contraction in retail sales immediately after a large expansion in economic activity?

 

 

Of course not. We know that the collapse in U.S. retail sales is real, thus the fantastic GDP numbers reported by the U.S. government for the previous two quarters are just utterly ridiculous lies. Instead of “growing” by a (cumulative) 7% over those two quarters (as reported), it is much more plausible that the U.S. economy shrank by 7%.

 

 

Further reinforcing that this consumer economy is rapidly shrinking; with the words “Happy New Year” still ringing in our ears, two of the U.S.’s largest retailers have just announced massive store-closures. Macy’s announced the closure of 14 stores, and JCPenney is closing 39 of its own stores. More importantly; these closures are seen as just the tip of the iceberg.

 

 

“I believe we are on the verge of a number of business failures of specialty retailers as well as some national general retailers which in turn will have a domino effect on those dealing with the retail industry,” says bankruptcy expert Chuck Tatelbaum. [emphasis mine]

 

 

Such a prognosis does nothing more than express simple, common sense. Obviously in a retail sector which is shrinking (in terms of sales) month after month – and shrinking rapidly – the store-closures must follow. Obviously in a “consumer economy”, any large/long/broad-based contraction in the retail sector must produce a major spill-over effect on the overall economy.

Dissect the words of the bankruptcy “expert” more closely, and about all he sees standing after the “business failures” and “domino effect” is Walmart. Can a Walmart Economy be the template for a successful consumer economy?

 

 

 

Of course not. Walmart’s “employees” (i.e. the Working Poor) can’t even feed themselves. While many corporations engage in food-drives to help “the less-fortunate”, in the case of Walmart’s “food-drives” the less-fortunate are its own employees.

 

 

As the U.S.’s dying, consumer economy becomes the Walmart Economy; the speed at which the U.S. plunges toward economic extinction can only accelerate. The U.S. retail sector, and its overall economy can now be summarized with a three-word warning: “look out below!”

 

 

However, lest any North American readers think that the U.S. is going down alone; don’t forget that Canada has Stephen Harper. In Canadian retail news; gigantic U.S. discount-retailer Target has announced that it’s bailing-out of its expansion into Canada – after suffering one of the worst financial blood-baths in the history of the retail sector. General Custer fared much better at “the Little Big Horn”.

 

 

The U.S. retail sector is rapidly plunging towards extinction, and Target is retreating toward the U.S. Doesn’t say much about the strength of Canada’s economy, does it?

 

 

......................Jeff Nielson for Sprott Money

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kchrisc's picture

Thanks for the article, but I did find it amusing the numerous uses of the word "deadbeat."

What does one call the originator of the loans who "printed," stole, the loan-money to fund the loans?

The banksters steal via "printing," and then loan that money back to their victims, who have no idea that is is actually their wealth that they are borrowing.

Looks to me as if the banksters, not the the so called debtors, are the "deadbeats"

The banksters need to repay us.

 

My guillotine prefers "deadbeat" thieves.

lakecity55's picture

Uptight, outta sight, and in the Groove.

Wanna get some booty?

Stock up on Tampax.

hotrod's picture

There are definitely food shortages.  Just look what's in the bag.  My mind has not adjusted yet because I still berate myself for eating the whole bag of Doritos.  Then I must remind myselt that the party bag is only 11oz now.

lordkoos's picture

People are still shopping it's just moved online.

the grateful unemployed's picture

Yahoo front page, Macy's drops the price of some $50 appliances to $10 check it out.

The Old Man's picture

Between ACA and the real wage/employment picture, the article is not surprising. You can actually find a parking space close to the big boxes now. Mostly people inside using up the last of the limit on their plastic while they can. 

But some people really do know where the money is:

http://www.wkyc.com/story/news/local/cuyahoga-county/2015/01/29/clevelan...

I think that's a "nuff said" point!

Monty Burns's picture

Here in Europe the "success" of the American economy is cited to justify the ECBs money printing frenzy

TheGreatRecovery's picture

Is the European press citing the rise of the USA stock market as the proof of that "success"?  Many journalists seem to see and write only what they're paid to see and write.  :-)

August's picture

The financial press, such as it is, in New Zealand insistently touts the USA as the "engine of global recovery".

It's pitiful, really.

Monty Burns's picture

Indeed they are!! Just heard now on euronews that American consumer spending has grown spectacularly in recent months!!!

Monty Burns's picture

Here in Europe the "success" of the American economy is cited to justify the ECBs money printing frenzy

Leraconteur's picture

A more accurate analogy would be to consider someone sliding halfway down the side of a mountain – and then falling off a cliff. 

 

I think a more accurate analogy would be to consider some idiot who decided to snowboard down Paradise Glacier and headed west and really got excited about his increasing speed and the rad moguls as the slope of the glacier went from 30°, to 35°, then 40° - woohoo dewd! - then 45°, 50° (holy crap I cannot stop), and then he hits a boulder head first on Nisqually-Wilson at 90 mph as he surfs to Olympia.

It is exciting and manageable at first, and quickly spirals out of control and beyond your capabilities.

basho's picture

well i would think that most amis have at least two of everything they don't need.

and at least three of everything they need, common sense excluded.

 

ali-ali-al-qomfri's picture

low employment : low retail sales, can't be that surprising

 

 

lakecity55's picture

"Ah, Reggie! Everyone is kicking their money upstairs to my Healthcare Partners."
"Retail is suffering, though, Munchkins."
"Err, OK, Ahh, I'll ask Wookie to go out for a photo-op at Tar-Jay."

I Write Code's picture

What kind of booshwah is this supposed to be?  "Shopping" and retail covers a lot of territory.  We still need to buy groceries and such, and the supermarket is the heard and soul of modern American capitalism.  So the question is, do we still need brick and mortar supermarkets?  I actually know real human beings who like buying their groceries online and having them delivered.  Is that still retail?  I dunno.  The big impact on retail has of course been the Internet, where central warehouses can stock (or redirect) 10x more products.  Maybe this is a good thing, even if it is a change.

And you can't assume 10% retail inflation, I use 5% generally and I guess that's a tad high overall since 2008, and of course the government number is about 2.5%.  And if oil stays cheap it's going to give us a year of no net inflation - which will panic the morons at the Fed, judging by recent noise, but that's another story.

Comte d'herblay's picture

I might be able to help.  

Just received a snail mail from the state bureau of income taxes for my 2011 return.  They claim that they checked with the IRS and I have not reported $762,465.22 in income for that year. 

They think I should pay my 'fair share' of income taxes and I whole heartedly, for once, agree with them.  Now if I can only find that three quarters of a million dollars they claim the Feds told them I have reported to the Fed but not reported to the state.  

This should be the beginning of quite an adventure into the dark, black hearted and obscene guts of the Pennsylvania system, specifically the Bureau of Revenue, Compliance, and Discovery.  I expect to lose at least several weeks of my life in missives, phone calls, frustration, anger, hostility, and other detritus with the state bureaucrats when I open with, "I don't know what the fuck you are talking about"!

But if I find that money I will contribute most of it, less the .032 state taxes, penalties and interest over 4 years,  to the consumer spending spree of my lifetime and with the multiplier good for about 4-7 times the 3/4 million, it should make for some positive stimulus in the economy.

 

 

 

 

The Duke of Skiatook's picture

"I don't know what the fuck you are talking about"!

That is how I like to start all of my conversations with government ass clowns. 

TheGreatRecovery's picture

Your State Legislator and State Senator might enjoy helping you out with bureaucrats whose little math errors, and the way they handle them, scare voters to death.  I found mine helpful.  Good luck.  :-)

SFopolis's picture

In 2010 I got audited by the Fed and told I owe $38K on 2006, and that I owed interest.  Nevermind that they sent the info to a 2001 address.  In 2011 I found out this 'mistake' (about the audit and the address).

I now owe $85 K +.  After going through my records repeatedly and going to the Fed. building 8 times.... and spending countless (over 80?) hours on the phone, they have still not told me what the 'discrepency' is.  Last month I was sent a bundle I had been waiting 3 years for, which it turns out was a copy of my 2006 taxes with a line item circled.  No commentary.  This, evidently, was the problem. Someone at the IRS didn't like a number that makes perfect sense and instead decided to attempt to take all of my wealth.  Why not?

Now it is up to me to 'prove' that my taxes were filed correctly.  Nevermind that this is over 7 years ago... and that they were provided with all of my documentation correctly in the first place.  

Blue in the face does not describe how I feel.......

Kafka and Orwell come to mind, of course.Good luck to you in your endeavour.

 

 

 

 

the grateful unemployed's picture

i thought they could only go back on you three years?

SFopolis's picture

Not correct.  They can go back as far as they wish if they find the error is enough of one in their book.  I am truly a small fish, probably not having seen over 30k in actual income in 2006 (net).  It's crazy.  Here is a link to the IRS site and the rule:  http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/IRS-Audit...

Nuts, eh?

 

 

I Write Code's picture

Congratulations on your new virtual wealth!  You are hereby officially now one of the 0.1% and are "invited" to submit $30,000 to the Obama Fund For Retired Golfers, which if submitted timely will cause the IRS to go somewhere else.

--

Yeah I had one of these back some years ago, IRS wanted to know why I didn't declare and pay taxes on the $30,000 in rental income on my steel mill in Indiana.  I wrote them a letter explaining I didn't have a steel mill, in Indiana or anywhere, nor any rental properties, nor any rental incomes, nor $30,000 in non-salaried income of any kind, and why didn't they just read the NAME on the 1099 instead of the apparently erroneous number and stop bothering me.  So of course two weeks later I got a more threatening letter from the IRS.  So I called them up and said, "hey what about the letter I wrote YOU?"  Well, they didn't have that handy, they were relocating their offices and everything was temporarily offline, ... but after that I never did hear from them again either way, certainly no apology.

SpanishGoop's picture

`This should be the beginning of quite an adventure into the dark, black hearted and obscene guts of the Pennsylvania system, specifically the Bureau of Revenue,`

Don´t forget the waterboarding.

 

Ban KKiller's picture

Materalism is being diminished by reality. Why shop when products are for shit? Black market is growing, thank you tax maniacs. Decentralization freaks out those who think they are invincible, Decentralized shopping, whoo-hoo!

stkboy's picture

Well Target were pathetic in Canada and even the CEO admitted he was arrogant when it came to Canada. They obviously had a supply chain problem as they didn't stock on the shelves. They were supposed to compete with Walmart but their prices didn't reflect that.......and as far as their clothes etc I can't see anybody buying their products. Also they had different prices for different stores which was insane. Most people are happy to see them go, except for the 17,600 employees who are going to share (if they qualify) in a $53 million severence package while the CEO walks with $61 million. The Target venture is a good study in how not to do business. An absolute disaster

Dragon HAwk's picture

Target also Forgot how Much Canadian's Love Canadian tire. ( Kmart type of Chain )

mtl4's picture

Seems to me you need to stock shelves first before declaring you're having a problem with sales in Canada.

 

Good thing Target sent their best man for the job, would hate to have seen results from the other CEO candidates.

numapepi's picture

Other than the back hand at Stephen Harper this was a good article.

If not for the absurd baseless attack on Harper I would have rated it all stars.

11b40's picture

While I agree with the article, it is just a little too dramatic.

The WalMart and Dollar Store shoppers will increase, but others like JCP will pick up traffic from those who leave more upscale stores like Macy's and Nordstrom behind as they trade down in steps.

The slow, steady drops of blood coming from 'death by a thousand cuts' continues it's march.  The patient may never be as robust again, but neither is death at the doorsteps...at least overall.  Many retail stores have already died, and many more are headed for extinction, but there won't be a complete die-off.

I recently returned from the Gift Show at AmericasMart in Atlanta.  It was well attended: not great, but better than the summer show was, and I didn't hear a lot of moaning and groaning about a bad year or holiday season.  Many retailers are struggling, but many more have learned to become much better business people.  Inventories are being managed, and dollars spent more carefully than in the past.  It is tough, though, and getting tougher.

Paveway IV's picture

Wal*mart and the Dollar Store both are extremely dependent on a strong dollar to keep their imported junk cheap. No doubt they don't worry about something like 5 - 10% currency fluctuations - there's plenty of margin. These have been working in their favor lately as the foreign currencies of producers have weakened.

What the low-cost retailers cannot manage is the risk of the dollar weakening - say 20% - relative to their producer's recovering currencies, coupled with their producer's rising wages. That day may never come, or it may be ten years away - I don't know. But no amount of ADDITIONAL belt-tightening and efficiency is going to save the lower-end retailers if they have to start raising costs when nobody is buying.

I agree that things are tough for them now, but survivable. Given the insanity in currency markets, I sure wouldn't want to bet money on either their future profit or survivability. I could be wrong, but it's cheap and easy for me to be wrong about risk today.

andrewp111's picture

This stat is not true

Gasoline consumption has plummeted by 60% since the “recovery” began.

The misconception comes from stats that break out gasoline sales by refiners and other distributors, and the mix of sellers has changed. In reality, gas sales are only 6% lower than the 2007 peak.

http://www.eia.gov/tools/faqs/faq.cfm?id=23&t=10

 

eswan's picture

For 50 odd years "shopping" has been a "life style choice" in the US. That meme is rapidly desolving. Our current age will be know as "the Death of Shopping." Look out below!!!!

Fun Facts's picture

"U.S. Retail Sector Begins Massive Collapse"

"U.S. Retail Sector Continues Massive Collapse"

fixed

NubianSundance's picture

Black Friday, cyber monday, the most suicidal policies in retail. Sales AFTER Christmas, dummies.

Vinividivinci's picture

Here in Montreal, I noticed that the "throngs" of "shoppers" walking around our Downtown commercial center, had not 1 bag from a store. People look but can't afford shit. Heck, I sent out 1 x-mas card this year (postage went up to $1 per stamp.

pupdog1's picture

I notice the same greatly reduced bagosity coefficient at my mall, the fanciest in the state.

Much less foot traffic (since before last Thanksgiving). 8/10 customers with no bags. Far more inner city crotch-grabbing baggy pants-to-knees hoodie rats.

Cheap-ass Chinese crap at what used to be the high-end stores, at the same price that used to buy excellent quality.

Store employees that would make excellent cast extras on The Walking Dead.

How fucking stupid do they think we are?

Stuck on Zero's picture

I'm loading up on toilet paper while it's still available in stores.

Fishhawk's picture

Be right and sit tight.  Good things come to those who wait, Comte. 

 

Comte d'herblay's picture

Well then why don't my JCP shorts bring me joy???

doctor10's picture

Maybe because they're "undershorts"?!!

 

Seriously-this articla has too many words.  All that needs to be said is right below

 

http://www.zerohedge.com/news/2015-01-30/thanks-obamacare-what-americans...

 

this insurance companies have sucked all the oxygen out of the economy by virtue of their  bailout called "ObamaCare"

BrocilyBeef's picture

Because they make you look like a soccer mom. Tank ass! :-)

Shocker's picture

Correct

Full Layoff / Closing List: http://www.dailyjobcuts.com

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Paveway IV's picture

The problem with the government lying with statistics year after year is that they eventually start to believe them.

It's like a passenger airliner full of economists and politicians. The aircraft is in flames and nosediving into the earth. Meanwhile, the economist passengers are all calmly discussing airline safety statistics and detailing the improbability of crashing for the politician passengers (who are quite calm). The politicians have long since pulled down their window shades so they don't have to look at the alternate scenario: the surface of the earth approaching the nose of their aircraft at 600 mph. Instead, they discuss creative ways to manage the aircraft-terrain risk with additional taxes.