Guest Post: A Final Word On Those "Robust" July Retail Sales

Tyler Durden's picture

Submitted by Jeff Snider, CIO of Alhamba Investment Partners

A Final Word On Those "Robust" July Retail Sales

This current weak trend in a broad cross section of economic accounts and variables has been a big threat to the decouple/muddle through philosophy.  Retail sales figures have been sharply lower in the most recent months, pointing very ominously to the exhausted state of that vital US consumer.  So it was very heartening to the decouplers to see a nice, robust rebound in July that was almost totally unrelated to the renewed soaring cost of energy and food.  The broad increase in retail sales figures, despite trends seen elsewhere however, seemed to be a bit of an outlier.  ZeroHedge created a bit of controversy by noting more problems in seasonal adjustments (http://www.zerohedge.com/news/mystery-july-retail-sales-beat-solved-it-all-seasonal-adjustment), only to be countered shortly thereafter by Morgan Stanley (http://www.zerohedge.com/news/morgan-stanleys-defends-retail-sales-seasonal-adjustments-crazy-zero-hedge-analysis-bac-upgrade).  So were the July figures muddle-worthy or otherwise?

It makes some sense that the difference in the number of shopping weekends is cause for large seasonal tuning to render a full apples-to-apples comparison between months.  I am not so sure that a mid-week holiday would cause such a major need for imputations and extrapolations, but that is the nature of econometrics and the vain pursuit (and false comfort) of economic precision.  Whatever the rationale, ZeroHedge rightly pointed out the inconsistency of results:

While there may have only been 4 shopping weekends in July 2012 vs. July 2011, that extra weekend found its way up into June 2012.  Compared to June 2011, there was an extra weekend that did nothing to help the atrocious results (on a seasonally adjusted basis).  Perhaps if we put the two months together to account for this shiftiness in Gregorian calendaring we can step outside these seasonal manipulations altogether.  While the mainstream of economics pursues the false sense of precision that comes from these attempts, there is a much easier method of getting at what is far more important:  the trend.

Using year-over-year changes strips out all of these econometric interventions into the data.  Since these figures are raw, they are not adjusted for inflation either (meaning there is no argument over what properly constitutes “real” retail sales growth). 

The retail sales figures from that perspective show a couple of very clear points:  1. Last year's Christmas season was not only weak and disappointing, it may have marked the inflection point in consumer spending (at least as far as retail sales measure); 2. The July "improvement" is far less impressive.  June 2012 had an extra holiday shopping weekend, but registered only a 3.3% improvement over June 2011.  Without an extra holiday weekend, July 2012 saw almost identical year-over-year growth; 3.4%.  No matter what or how weekends were arranged within the calendar context, non-adjusted growth was not really all that inspiring in either month. 
 

What may be worse is that since March unadjusted retail sales have consistently been running below the moving average.  That demonstrates conclusively and unambiguously that momentum in the consumer segment is slowing.  Inflections in retail sales, as you would expect given an economic system dominated by consumption, are followed by recessions.  At this point in the “cycle” (such that there is a cycle outside of the mini-cycles created by central bank interventions) there is not much left to reverse the course.

As more and more Americans fall off the 99-week cliff into disability (best case) or the general abyss of the new structural joblessness, it is hard to see any monetary dosage or application that would be beneficial to the real economy.  When you step back and try to analyze why there was an inflection in mid-to-late 2011, the combined impacts of waning job growth and exhausted government transfers under the umbrella of monetary-driven commodity pressures make for not just a tough environment or a muddle, but the reversal of everything that would be considered necessary for widespread economic health in any meaningful sense (there might be more dollars circulating but that is not really the true measure of economic success). 

If this inflection in consumption is indeed valid, it makes sense that the early part of 2012 would then experience economic “volatility” – revenue pressures at firms cause them to cut back on capex or re-investment in real projects, including a decrease in the pace of hiring new workers.  Manufacturing falls off (seen in the ISM and regional Fed surveys) as reduced demand from businesses works its way back into this vicious cycle of employment malaise where job growth is consistently and vitally below population growth or labor force expansion.   As government transfers drop off, the segment of the economy under the gun of stagnation rises in proportion and the bifurcated economy becomes more so – except that as the troubled half grows it inevitably pulls down the half doing relatively well.  What looks like a muddle of weak growth is really the rot of monetary intrusions eating at what should be a free market-driven reset to the previous dislocation of failures from past monetary episodes.  And it is all in the name of some ephemeral “wealth”. 

Stock prices may be higher, but the “wealth effect” is dead without the ability to turn paper portfolio values or tangible real estate “wealth” into spending through credit.  It has always been about debt. 

What might retail sales growth have looked like in the middle of the last decade without the $4.5 trillion in new mortgage debt and $500 billion in new consumer debt (added between 2003 and 2007)?  As we are about to find out, the number of weekends and the placement of holidays would have been the least of the concerns. 

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nope-1004's picture

Easy credit brought demand forward.  Incentives like "cash for clunkers" simply brings future purchases to the here and now.  That is why 'robust' retail won't happen again.... easy credit of the last decade made shopaholics out of everyone, using their house LOC as the means.  Now the gig is up.

 

 

AlaricBalth's picture

X-13 ARIMA brought demand out of nowhere.
"Assume a can opener. "

AlphaDawg's picture

What the fuck does retail matter anymore? There is no way the retail, or any other, tax revenues will fix this soverign debt problem.

Everything is bullshit, you know it.

If you are talking from a stock perspective, ur fuckin crazy! Short, long whatever, youll get fucked in the end.........you cant time this shit. Clearly the way to make money is not investing, its using your mind and skills and convert your toilet paper into something physical.

The Monkey's picture

VIX at a 5 year low, volume terrible, treasuries with a mini capitulation at a bullish equity extreme.

Time to double down: VXX, SPXU and FAZ.

Looks like we might get an outright crash here in the next couple of weeks.

Poor Grogman's picture

Only if the PTB "let it happen"

Assume it's planned then ask, what could they be trying to achieve?

NotApplicable's picture

I just ruined DishTV's numbers by canceling my service that somehow had gotten to $100 a month (with NO movie channels) after being "bundled" to my phone service for a few years.

They offered to give me $15 a month off of it. I laughed and said that is still stupid expensive for TV that I don't even hardly watch anymore.

nodhannum's picture

Just did the same with DirecTV!  Outta here Jack!  They call and send mail offering(s) to lower the price for what, government propaganda and mind numbing "Jersey Shore" shit.  Gone...done and $100/mo to the better after tax.

Lewshine's picture

I work in Dallas installing DirecTV. You'd be amazed at what kind of conditions I see on my installs. People who live in trash up to their knees, without toilets that flush, Rat feces, and cochroaches running everywhere, stinking to high heaven...YET, ordering the Mac daddy double deluxe, 2500 channel, east coast/west coast, all sports and movies HDTV package for a mere $599.00 per month. Priorities.

jplotinus's picture

When I see posts like the following I also see a subliminal message stating:

--It's all their own damn fault--

That message prevents us from naming the real cause of economic collapse brought on by corporate and bankster fraud.

I suggest a reconsideration of the need to post stuff that blames poor people for engaging in escapism, that might actually be a healthy coping mechanism:

"I work in Dallas installing DirecTV. You'd be amazed at what kind of conditions I see on my installs. People who live in trash up to their knees, without toilets that flush, Rat feces, and cochroaches running everywhere, stinking to high heaven...YET, ordering the Mac daddy double deluxe, 2500 channel, east coast/west coast, all sports and movies HDTV package for a mere $599.00 per month. Priorities."

No need to kick poor people when they are already down for the count.

Neethgie's picture

you trollin brah?

it is there own damn fault.

FerretBrain's picture

If you can afford premium HDTV, you're not poor.  Believing otherwise is the result of too much coddling.

DeltaDawn's picture

They need to escape through housecleaning.

skipjack's picture

Absolutely.  You may be poor but you don't have to live in filth.  As long as you have running water you can clean yourself and your living quarters.  Water's still cheap.

LooseLee's picture

Unfortunately, anyone who can afford $599.00 a month for 'entertainment' is not poor and in now way 'down for the count'. Are you serious or just stupid? Anyone who can afford that level of cable TV is probably a banker or corporate executive....

CoolBeans's picture

Wow.  Just wow..speechless.  That's scary.

CoolBeans's picture

Same thing happened w/our bundled Internet + phone lines...
strange charges being piled on. Bastards...they just nickel and dime a customer to death.

DirecTV...after spending 3 weeks up north with only a radio, we decided we could easily trim down TV. Started by cutting all the worthless movie channels (which rarely show anything good). Will trim further in given time - but kids like sports channels...so is hard to cut it entirely. If it was just we adults (Mom and Dad), we could do with just news.

Westcoastliberal's picture

I wasted 15 minutes of my day on hold waiting for Verizon to tell me, "Well we notified you about the $6 monthly increase in your 3 room DVR, and you really won't save anything by canceling because we'll charge you $12 a box for a regular one."  But, I said, when I talked to your customer service rep 2 months ago they promised the DVR charge wouldn't increase, here's the transaction number ********.

Lieing to customers has become rampant with all these monolithic companies.  They'll tell you anything, then later it's "so what, go ahead and change providers, we don't CARE!"

CoolBeans's picture

OMG...absolutely correct!  They try every trick in the book and then some.

AT&T: Nearly two years ago, I cancelled an AT&T cell phone account by phone after an outrageous bill....those bastards have continued to bill me monthly despite my returning each and every one saying I'd cancelled.  I HAD NO CONTRACT, by the way.  We're coming up on two years despite notices. What is up with that?  Well, another stamp and letter...this time will copy the Attorney General's office, I guess.

DirectTV:  Every so often (at least 1-2x/yr) they add subscriptions - mainly sports to my bill.  I have to CALL them to have them removed.  That should be illegal.  Last call was two weeks ago.  The customer service rep says, "Can I ask why you want this cancelled?"  Response, "Because, as with every subscription your company adds to my account without authorization:  I DIDN'T ORDER IT!"

I then asked the DirecTV rep why a strange $2 or more amount keeps arbitrarily showing up on my bill when I'm paying each in full monthly -- every time I've gone to my account in the last few months there is a straggling fee.  She couldn't tell what that was about.  WHAT????

Macy's account:  Canceled a card I'd had for more than 20 years.  I paid the account in full in January....despite this a strange fee kept being billed each month ($2, $11) - I wrote to the credit co.  No response X2 months.  Wrote again - threatened to file formal regulatory complaint for billing practices - 2 wks later received a "oops, an error" in response and a check to refund the erroneous fees I'd paid during those month as needed to keep account in good standing was refunded as requested. 

PEOPLE:  Check your accounts over thoroughly - these and other companies seem to be pulling some dastardly tricks and I've noticed a huge increase of this activity in 2012.  $2, $5, $10 x all their customers = some serious unearned cash for these terrible credit/service companies and they're hoping that you're not paying attention.

CrockettAlmanac.com's picture

When I cancelled my Dish they offered three months free. The guy couldn't understand why I wouldn't take it. He was flummoxed.

I only kill chickens and wheat's picture

I confused a poor kid at a warehouse store pushing Sat TV. Me "I don't watch TV", Him blank stare, and then "what do you mean you don't watch TV", I said I rent some discs from netflix, but don't have cable, Sat, or an over the air antenna. Finally comprehension seeps in and he realizes "well I guess I can't help you with anything then.

MisterMousePotato's picture

I haven't had a television since 1984. When I visit my mother, though, I watch it. A lot. Reaffirms my decision and belief that I'm not missing anything.

Just think what I'd have if I had taken that $100/month plus, each and every month, since 1984 and invested it, in, oh say, gold? What would I now have? 50 AGEs? 70?

We gotta stop treating our roll(s) of twenties like they're good time coupons at the county fair. The smallest leak can sink the biggest vessel.

Someone posted this the other night:

Wise men are instructed by reason; Men of less understanding by experience; The most unknowing learn by necessity. Wise men do in the beginning what fools do in the end.

I copied it and set it as a screensaver.

slaughterer's picture

ALL WE WANT FROM YOU, MR TYLER DURDEN, US MINIONS, IS FOR YOU TO PROVIDE JUSTIFICATION FOR WHY WE ARE LOSING TONS OF MONEY BEING SHORT AND OWNING PHYSICAL GOLD RIGHT NOW. CAN YOU DO THAT FOR US, PLEASE?  OR DO WE HAVE TO SUFFER THE USUAL SADISM FROM ZH?  

AlphaDawg's picture

Fuck up, you pussy.

Its your money, your decision where you put it.

Remember Shakespere: All that glistens is not gold, often you have heard this told, many a man his life hath sold, but his insides to behold.

ZH and the tylers are not gold either dick

Think for yourself

slaughterer's picture

AlphaDAWG = rude Aufklaerung.  Fuck you, too, dawg.  

AlphaDawg's picture

Thanks man, nice to find out you actually have some balls.

Ya get my drif though......you gotta put your money where your mouth is, not just casue anyone tells you to. Take advice and make your own decisions.

fuu's picture

Where is the afternoon wrap up post?

luna_man's picture

 

 

"slaughterer",

DON'T BLAME MY MAIN MAN!!!...Perhaps, you should be in cash!

 

TOO MANY DUMMIES!!

swissbene's picture

there may not be justification.  the primary reason why you are losing tons of money trading is because you are attempting to gain tons of money by trading.  the prevalence and role of this 'business' activity is interesting topic itself.

but taking the objective of trading to be given, the following points are central on this site and relevant:

1. one would be nuts to trade in this environment and expect a reasonable outcome.  manipulation and fraud are widely reported and discussed.

2. related: central banks are openly and secretively intervening in most markets.

3. captured media have effective smokescreen/propoganda in place whether intentional or not.

4. large turns are difficult to time precisely.  long gold + short equities + short EUR could do okay in the end.

5. less retail/sucker participation in the market.  you are trading against sharks.  likely they understand sentiment on sites like this and perhaps even manipulate.

fwiw: i wish you luck & also am losing with similar strategy (not the first time).

GubbermintWorker's picture

I've done rather well with gold and silver. But, I started buying a few years ago ;-)

 

 

Never One Roach's picture

House prices down 38%.,......GLD and SLV up more then 200%.

Getting Old Sucks's picture

Me: Hon, you want to go shopping?

Hon: you need anything?

Me: No, you need anything?

Hon: no.

Me: Yeah, why waste five bucks in gas.

El Oregonian's picture

Retail Sales??? In this frigg'in crappy economy NOBODY pays Retail anymore... WHOLESALE, BABY...

LMAOLORI's picture

 

 

In this "frigg'in crappy" economy people are shopping at yard sales

Hard Times at the World's Longest Yard Sale

New_Meat's picture

retail is for the g...

- Ned

catch edge ghost's picture

Actually, when seasonally adjusted, this is the pentultimate word. The final word would be - lulz.

poor fella's picture

It was me... sorry, I bought A SHIRT to please the wifey since we were out 'shopping'... (serious too)

Although, retail analysts see purchases on the horizon as the season changes (=O). I have to ask though, who buys new winter jackets and shit EVERY YEAR?!? Is your crap THAT CHEAP that it doesn't last a few months? We all know that's b.s. - it's 'fashion'

FUCK YOU FASHION!!

FUNKTION precedes fashion every time.

Getting Old Sucks's picture

It is truely amazing but we have so many clothes that are really old but almost new condition wise.  It's laughable when we see a color, patern or style come back and go to the closet to find we already have what's new.  Hon has so much shit with the tags still on that's better than the new same shit.  It goes to prove that we all bought so much shit in the past that we don't need anything.  I have at least 5 winter leather coats/jackets.  Shoes I've yet to wear.  Shirts and pants to last me forever,  Loads of tee shirts, underware, and socks still in the packeges.  I figure I have enough shit for the rest of my life.  Wish that wasn't true but have to be realistic.  LOL, if we go out and spend ten bucks, I yell out "see hon, we stimulated the economy!"

RockyRacoon's picture

Just wrap the clothes up in a gift package and give them to each other.  It'll be like Christmas in August.

CoolBeans's picture

Keep new clothing purchases to socks and underwear.   Better yet...no underwear :)

LeisureSmith's picture

Planned Obsolescence is everywhere. Marketing is constantly trying to convince us that buying low quality stuff at a higher price is better. Obsolete style, teck, and consumer goods booby trapped with failing parts. http://www.youtube.com/watch?v=0bxzU1HFC7Q

And yes, Fuck Fashion.

luna_man's picture

 

 

"poor fella",

 

Made in China, AIN'T made to last!...It's colorful.

I only kill chickens and wheat's picture

I want a blender, but going to find a used one from 70's 60's if possible. Oster's still have a metal base, but the inside parts are plastic crap and don't get me started on stainless steel shit from china, it sure as hell isn't like the old American made SS.

Cursive's picture

Don't forget, either, the survivorship bias in these numbers.  Nobody is subtracting for Circuit City.

Yen Cross's picture

 When is there going to be a discount for paying for fuel with "XAU"?  Come on ARCO, the "Fiat" discount just doesn't cut it anymore!

  Independant gas station owners should buy , old local "Bank Branches" on corners. They have vaults in them, and good demographic/traffic studies.

Tsar Pointless's picture

And a final word on both this article and its subject matter from ZH's resident Tsar:

Pointless.