What's Wrong With This Picture?

September retail sales were a modest miss: that much was made clear earlier. However, what the market may have missed is that this "miss" was on the back of Department of Commerce's favorite fudge factor: seasonal adjustments. The 0.1% "decline" in retail sales was for the seasonally adjusted numbers of $426.3 billion in August and $425.9 billion in September. So what happens when one strips away the Arima-X-12 a la carte adjustment which is always and everywhere in the eye of the beholder? Well, this:

As the chart above shows, the unadjusted retail sales number difference from August to September was a whopping $40 billion, or a 9% drop in one month, which in turn meant the headline retail sales number contained in it had an "adjustment factor" of $39.6 billion. This was the biggest NSA September retail sales drop on record, even worse than the prior worst such monthly drop posted in 2007 when the Second Great Depression was about to begin.

So one wonders: just what is the basis for the adjusters to apply the biggest ever seasonal add back to the raw number ever?

Either way, whatever it is, the algos are obviously infatuated with the record NSA September sales drop which is the reason for the fresh all time S&P high - if anything, record unadjusted retail sales drops is just what the Fed ordered to keep the taper forever on the backburner.