U.S. Retail Sector Begins Massive Collapse



.................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