Core Retail Sales Beat Despite Electronics And Appliance Sales Drop; Empire Fed Misses Big

Good news, bad news on the economic front this morning. The good news: December advance retail sales rising 0.5% on expectations of a 0.2% increase, up from a 0.4% revised November print. Excluding the volatile auto sales, the number was up 0.3% on expectations of a 0.2% increase, and up from a 0.1% decline. Excluding autos and gas, the print was 0.6%, on expectations of a 0.4% increase. The biggest increase in December retail sales by category was in food services and drinking places which rose 1.2% in December, the same as November. Strong numbers were posted at clothing and accesory stores (+1.0%) and health and personal care (+1.4%) - all very low margin sales. Yet where the report was undisputedly weak, and where many were hoping for a boost but did not get it, was in the higher margin electronics and appliance stores, which dropped -0.6% in December, down big from the 2.3% increase in November, and further weakness for those hoping that December saw a surge in spending over gadgets. In other words, more bad news for the makers of iGizmos.

As for the bad news: it was all in the Empires State Manfuacturing Index which missed expectations big, and in fact posted a decline from the abysmal November miss, revised to -7.30, and now down to -7.78, the sixth negative print in a row, on expectations of an unchanged print. This was the 5th miss in the series in the last 6 reports, the worst miss in 4 months, and the lowest number in 4 months. Alas there was no hurricane in December to blame this major miss on.  Oh yes, we remember, "the fiscal cliff."

Empire Fed:

From the report:

The general business conditions index was negative for a sixth consecutive month and, at -7.8, was little changed from its recent readings. The new orders index fell four points to -7.2, and the shipments index declined a full fi fteen points to -3.1. Price increases picked up, with the prices paid index rising six points to 22.6 and the prices received index rising ten points to 10.8, the highest readings for both of these indexes in several months. Labor market conditions remained weak, with the indexes for both the number of employees and the average workweek remaining below zero for a fourth  month in a row. The level of optimism about the six-month outlook rose some what from December, but remained low compared with levels in early 2012. Significantly, the capital expenditures index fell to 4.3, its lowest reading since 2009.

Other categories not doing very hot in January were New Orders, plunging to -7.18 from -3.44, Shipments down to -3.08 from 11.93, and Unfilled Orders -7.53 from -6.45. There was a modest pick up in the Number of Employees rising to -4.30 from -9.68, Prices Paid and Prices Received both rose, offsetting margin gains, and Inventories, as always, posted an increas to -8.60 from -11.83. When in doubt - stock up on inventory.

It gets worse:

In a series of supplementary questions, manufacturers were asked about anticipated changes in their workforce and the factors underlying these  changes. Twenty-seven percent of survey respondents indicated that they expected the total number of workers at their firm to increase over the next twelve months, while 19 percent predicted declines in their workforce—a considerably less positive balance than in last January’s survey. Among firms planning to boost employment, high expected sales growth was widely reported to be the most important impetus to hiring; conversely, low expected sales growth was most widely cited as the primary restraint on hiring. Sales growth was also seen as the primary factor behind employment increases and decreases in the 2012 survey.


Prices increases steepened, with the indexes for both prices paid and prices received reaching their highest levels in several months. The prices paid index rose six points to 22.6; twenty-five percent of respondents reported that input prices had increased and just two percent reported that input prices had dropped. The prices received index rose ten points to 10.8. Employment indexes suggested that labor market conditions remained weak. The index for number of employees was  -4.3, and the average workweek index was -5.4. Although these readings were somewhat higher than in December, both indexes were negative for a fourth consecutive month.

And so on. Expect much more endless easing by the Fed following this confirmation that the US economy is going nowhere fast.