Consumer Spending Tumbles: BofA Blames Snow, Oil; Claims Its Models Are Right, Reality Is Wrong

Tyler Durden's picture

Stick a fork in the now proven wrong theory that plunging gas prices would boost consumer spending. Why? Because 4 months after the full impact of tumbling gas price was said to become apparent, consumer spending is not only not picking up, it is in fact slowing down more, especially in those places where there was snow in the winter, and gasp, where oil price actually fell the most!

Ridiculous? No. This is what the latest Bank of America card data survey reveals. To wit:

"Consumer spending remained sluggish in February, according to the Bank of America card data. After netting out volatile gasoline and autos, spending on Bank of America credit and debit cards was unchanged MoM seasonally adjusted. On a YoY basis, sales are still up a solid 5.4%, but that reflects favorable comps from last year."

How is it possible that everyone could have been so wrong? Simple: for the second year in a row, nobody could possibly anticipate that the "gas savings" boost to consumer spending in the early winter would be fully (and then some) offset by an utterly inconceivable heavy snowfall in January and February. Because seasonal adjustments are there only for show, and to smooth out goalseeked lines presumably, not to - you know - adjust for the seasons.

The BofA scapegoating is just humor in its most purest:

We can explain the weak MoM rate, in part, from the harsh winter weather in February. Excessive snowfall in parts of the country left many households stuck at home, reducing spend on their credit and debit cards. Of course, we attempt to control for seasonality, but it is difficult to capture abnormal weather patterns.

Wait what: seasonally-adjusted data is unable to capture the seasons? Please do go on...

But it gets better, when BofA tries to prove that it wasn't its fault its models predicted something totally different than what actually happened.

We can test this hypothesis by examining spending by the largest metropolitan areas (MSAs). As we show in the Chart of the Month, retail spending ex-gasoline and autos tumbled in Dallas, Charlotte and Boston. To control for noise in the data, we take the three-month moving average – simply looking at the change in February, however, would reveal a particularly sharp decline in Boston. The Boston MSA had record snowfall, while Charlotte was hit by late winter storms.

But the absolute punchline is this: recall that the primary thesis of the "plunging oil is unambiguously good" herd of penguins was that lower oil and thus gas would boost consumer spending. Well, apparently that is the case everywhere else... except where the oil plunge is strongest!

Dallas also dealt with unseasonably poor weather, but we also suspect the weakness could be a reaction to the decline in oil prices, which has curbed investment in the oil industry, hurting the local economy

And back to square one, as BofA concludes its models were right; it was reality that was wrong.

If not for the unfortunate weather, we think consumer spending would have been stronger. The backdrop is favorable: solid job growth, improving consumer sentiment and savings from lower gasoline prices. We remain constructive, forecasting a healthy acceleration in consumer spending in the coming months.

With that load of humor behind us, here is something actually useful: actual data charted:

 

And the hits just keep on coming, because the retail sales ex autos and gas was the worst since January of 2014!

  • Looking past the effect of gasoline prices still reveals a slowing trend in consumer spending ex-autos, as can be seen by the blue bars in the chart.
  • After a solid gain in October, sales ex-gasoline and autos have weakened. The data in February was particularly sluggish even relative to the trend.
  • We have been surprised by the weak performance of spending ex-gasoline and autos given the improving consumer backdrop.

But... but.. the model said so...

 

  • The trend in consumer spending has slowed across the sectors, as measured by the three-month average of the MoM SA change.
  • Restaurant sales still look relatively stronger, with sales at fast casual dining and quick service restaurants remaining positive, albeit slower than the average monthly growth rate last year.
  • Sales at furniture and clothing stores have weakened, reflecting a decline in demand for bigger ticket items.

  • The trend in retail spending, as defined by sales ex-autos, ex-gasoline, continued to weaken in Texas. Sales are running at 2.8% yoy in February, a notable slowdown from the pace of 4.5% last summer.
  • For the first time since late-2010, spending in Texas is running at a rate that is slower than the rest of the country.
  • We have seen other signs of weakness in Texas – initial jobless claims, for example, have spiked. We are concerned that the decline in oil prices has already started to weigh on the local economy.

  • The seasonally adjusted retail sales ex-autos aggregate from the BAC internal data was unchanged MoM in February. This left the three-month moving average to fall 0.8% mom SA.
  • Nearly all of the recent contraction can be explained by a decline in spending at gasoline stations as a result of falling prices over the past several months.
  • BAC card spending has trended very closely with the comparable measure from the Census Bureau, suggesting the Census data, released on Thursday, should show a similar trajectory.

* * *

But wait, surely the money "saved" from the lack of spending on gas, if only for the past 3 months now that gas prices are screaming higher, was spent on something? Yes, precisely. And we explained precisely what that something was in "Here Is What Americans Spent Their "Gas Savings" On"

 

And with that we consider the "mysterious" case of the missing US spending, closed.

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Took Red Pill's picture

The slow economy is one of the reasons oil is low. In that case, lower oil is not going to boost the economy! Idiots!

Bearhug Bernanke's picture

That and the lower prices weren't really that significant. It's not like it dropped below $1 or anything.

Bunga Bunga's picture

Self-reinforcing downward spiral. Layoffs, rig count drop cause lower demand for oil, rinse, repeat.

lordylord's picture

"In that case, lower oil is not going to boost the economy! Idiots!"

FDR thought that low prices were the cause of the Great Depression.  That's why the government artificially raised the cost of crops making food too expensive for people to afford (i.e. people starved). 

Ahhh, government and Keynesianism go so well together.

stocktivity's picture

As Boston goes, so goes the whole nation.

TheReplacement's picture

Boston (hide in your basement while militarized police go door to door performing unconstitutional searches for a wounded and unarmed kid who isn't even in the same neighborhood) Strong!

El Vaquero's picture

I always love it when some asshole models something, the model doesn't match the real world, so they claim that the real world is wrong.  That's numerology at its finest. 

Farqued Up's picture

Slaughtered livestock and buried them. Of course, the bureaucrats had full freezers.

B2u's picture

Weather?  Don't we have winter every year?

GeezerGeek's picture

Perhaps their politically correct forecasts anticipated a warmer winter due to man-made global warming, er, climate change. Then again, didn't I read that while the East was all cold and snowy the West was warmer than normal? Apparently, on average then, it was a pleasant winter.

Ward cleaver's picture

No. Prez issued executive order of no winter next year.
Republicans outraged that he circumvented the
process for the 833rd time this term.

Vinividivinci's picture

Well, as ZH has explained again and again, the "economy" no longer depends on consumer spending as the only thing that matters to banks, CEO's and the Goobament is the printing of money and it's "trickle up" effects...therefore, who gives a fuck what the BofA has to say or any other "financial institution" for that matter !

CuttingEdge's picture

Spending on health care?

I bet that fucker is through the roof...

youngman's picture

There is a stat out today how the sales of prescription drugs is up 31% this year...we are drugging ourselves to death....drug inflation...way overboard..

stocktivity's picture

Our models are right dammit!!!! 

stant's picture

Things will be better this spring. But for now I've got to blindfold the insurance agent and drive him out to the bunker. Seems the flooring might liquidate me under long term exposure . That's bullish

madcows's picture

I bought Ice Melt, and some new weather stripping for the door.  Does that count?  I probably provided 15 minutes of employment for the cashier.

Big Corked Boots's picture

The cashiers in my neighborhood big-boxes are like that too. That's why I buy online.

Smegley Wanxalot's picture

I go to the self checkout wherever possible so I dont have to deal with the idiots like the cashier who tried to charge me $10 for a lemon, and looked at me like I was a dick when I stopped her for it.

ThirteenthFloor's picture

First fallacy oil may be down, gas prices are not.

silverer's picture

I noticed myself that gas prices are not correlating with oil prices.  Gas prices did fall quite a bit, but they're back up, so although prices are lower, they are not much lower.  So everybody here has a valid comment when they say "big deal".  I also drive less, make a point to try to do three things anytime I pull out of my driveway, so wait until I have a "three thing" list.  It's become an automatic habit now, and the easiet way to increase your gas mileage without buying a $60,000 electric car.

daveO's picture

Big oil (not enough competition) wants to screw US customers while DC wants to screw Russia. That's why a pricing differential. 

Rootin' for Putin's picture

I have to say that personally snow does not affect what or how much i buy no matter how much of it there is.  All it does, is delay when i buy it because i might decide to wait until the roads are better for a day or two if i have to go across town.  Which leaves me to shop at the mini mart which would actually cost me more.

So, in short, i don't understand these figures and think they are bullshit.

Philo Beddoe's picture

Man, that was one fucking bad blizzard. When I got to the mini mart they only had one iwatch left. Boy, was I lucky I got there in time. 

silverer's picture

Lol!  Now you're only short two!

silverer's picture

I guess they forgot to negotiate their cut of Obamacare.

toady's picture

Reality is wrong. Have you seen the stuff they call "reality TV"? It's just wrong. Flat-out wrong!

Jack Daniels Esq's picture

Yellen is the fugly Snow Queen

q99x2's picture

Fat f'kers can afford less food because their healthcare costs have risen. Sounds good to me. My healthcare costs are still 100% free so it is easy for me to say.

youngman's picture

Obamacare is sucking up all the excess cash....and will forever..

FreeShitter's picture

and by design to kill whats left of the rotting middle class.

roadhazard's picture

ObamaCare is always a popular argument but only 37mil. are paying into ObamaCare policies. Not that much of a big deal. Health care costs are up because of greed as usual.

Shitgum Suicide's picture

Road kill- I think you are forgetting that there are a few million "Americans In Waiting" who are using our health care system like it was free or something. The cost of healthcare includes those going the medic aide route that gets spent but you have too pay for.

Not to mention the increase of non-Ofuckme care insurance holders. Those who have private insurance are paying more for those who don't
pay anything because it's just not fair. That's is where the increase spending in healthcare comes from.

roadhazard's picture

You mean the ones paying in NO money. My reply was about Americans spending habits and where Their money goes. If you don't pay then you are just another deadbeat. OK now you can go back to looking stupid.

"those who pay are paying for those who don't."

You mean just like it was BEFORE ObamaCare. You would think with a New 37 mil. paying premiums now the cost of paying for those who don't would go down. heh, It's sort of like the "peace dividend" after the cold war. I'm still waiting on mine.

FreeShitter's picture

Using your credit card at the dollar store....only in #murica

nakki's picture

I'm just hoping it doesn't get to hot this summer or this improving vibrant economy, that's adding 260,000 jobs a month might be in real trouble. WTF?  

This from the company bought Countrywide and Merrill Lynch. Maybe they should get rid of the computer model and do their own digging for awhile.

I can't believe all those people pulling down $320 a week aren't out there spending. Fucking ungrateful fucks are lucky to have a job. Now get down to rent-a-center and pay $1000 for that $250 Samsung TV made in  2013.

FreeShitter's picture

Fuck rent-a-shitter, im gonna buy one off an old mexican at a pawn shop.

FreeNewEnergy's picture

These figures cannot be trusted because anybody who uses BofA credit or debit card is a fucking muppet and we all know that muppets can't drive and only buy Cheetos™.

The Obamanation is strong. Thus spake Zara-choomer.

pragmatic hobo's picture

... geez ... it's boa ... what do you expect?

venturen's picture

where are the line items for taxes and banker rescue fund?

Shitgum Suicide's picture

I'm getting a whiff of bull excrement with a subtle hint horse puckie. I love the smell of a dead economy in the morning. Smells like...shit

Pasadena Phil's picture

Shouldn't there be a hockey stick chart proving that their model can't be wrong? We are all just "prosperity deniers"!

Ghostdog's picture

According to National Weather Forecaster Tom Skilling, this was the 19th warmest winter on record. SO much for weather unless you are a climate change-ologist

HandyCrapper's picture

We are in a Deflationary environment. These POS's should all be canned and shipped to Russia. Time to start hoarding?

Falconsixone's picture

No money will slow spending. The only spending comes when the important people need new yachts, drones, bombs, bjs and jets.

Bemused Observer's picture

The arrogance astounds me. This conviction that any time the consumer manages to save a nickel, he's gonna run out to the mall and buy something...I'm so sick of hearing it.

Fuck you, Wall Street "analysts". A lot of us aren't spending because we don't WANT more crap, we have enough. We'll hang on to any extra money, won't be feeding it to you. So fuck your I-Phones, discount restaurant meals, formulaic movie franchises (Stop with the vampire theme, please.) cutesy "gadgets" that remind us to wipe our asses, and Apple watches...keep all your crap.

And they act all shocked at the notion consumers AREN'T responding as they wished..."How can that BE?", they ask. These folks actually feel ENTITLED to our discretionary income, it outrages them that we aren't allowing it to 'trickle up' the way it's supposed to.

Fuck you.

On a side note, what is UP with all these devices for communication anyway? A commercial playing now has some guy who wants to know if his device can finally let the stewardess on his flights know he doesn't want to be awoken...Just think...all these years he's been catching the red-eye those foul bitches have been tormenting him, but thanks to technology he can finally TELL them to leave him alone! What an amazing day for our little traveler!
Did this moron ever notice that the offending stewardesses always happen to be ON THE SAME FUCKING PLANE AS HE IS? And that he could *gasp!*, actually SPEAK to them (yes, with his MOUTH, using REAL WORDS) and ASK them not to wake him? Was he really helpless to do so before the invention of this device?
Same commercial has a kid asking if the device can tell her how long she'll have to wear the cast on her arm...Well kid, perhaps. But I'm betting that the doctor who put the cast ON would have the answer to that one, why don't you run your question past HIM, see what happens?

Jesus H. Christ. THIS is the kind of shit they want me to buy. Well, no thanks, I'll pass. Believe it or not, I've discovered a 'weird new trick' to communicate with my fellow man using only my lips, tongue, and a controlled exhalation of the air in my lungs. And I don't even need to purchase a device or a service plan to utilize it!

It's called talking to each other, and I think it is just the kind of disruptive technology we NEED today to break the grip of all these personal 'devices' designed to help us communicate with people who are standing right next to us.

Oh well, at least the cell phone miniaturization trend has turned, and the things are getting bigger again. I kept accidentally inhaling them during use, so this is a welcome trend. But now the computer screens are getting smaller, they actually expect you to surf the web using a wristwatch...So I guess I'll eventually need a travel cart for my phone but I'll have to rummage through my purse to find my computer, which will have a display screen the size of a postage stamp, and keyboard keys the size of bacteria...FML!

Dig Deeper1's picture

Why waste your breath on these idrones.  I have two fingers (one on each hand) that I use to communicate with these morons.

RabbitOne's picture

I am still spending. I bought 600 green tips 62 gr…