Following last month's narrative-crushing drop in retail sales, despite all that low interest rate low gas price stimulus, January was more of the same as hopeful expectations for a modest rebound were denied. Falling 0.8% (against a 0.9% drop in Dec), missing expectations of -0.4%, this is the worst back-to-back drop in retail sales since Oct 2009. Retail sales declined in 6 of the 13 categories.
Clearly it has been a very cold winter, with both December and now January big disappointments.
Retail sales disappoint, again
In worse back-to-back drop since oct 09...
The retal sales control group continues to crawl sequentially, while the relatively strong Y/Y data is still due to the base effect of December/January 2014 being slammed by the "Polar Vortex." If February spending does not pick up significantly, we will see a 2% handle.
The breakdown of sales by category shows that 6 of the 13 major categories posted a decline, but what was most surprising was the 1% drop in auto dealer retail sales, which slid 1% despite the low, low gas prices. Did subprime auto loans just run out?
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Finally, none of the above should come to a surprise to those who read our article from Tuesday, previewing not only today's miss but explaining its reason as well:
One just has to laugh while reading the following hilarious attempt to justify the cognitive dissonance by Bank of America's analysts - and everyone else for that matter - who were oh so certain that tumbling (if not any more) gas prices would translate into a "splurge" of spending on non-gas related goods and instead, when looking at their internal data, are seeing something inexplicable.
To be sure, it wasn't just BofA data that has shown a plunge in discretionary spending: the December retail sales report last month courtesy of the government showed precisely the same, even if BofA's analysts - and everyone else - rushed to describe as a "one-off" aberration which would quickly be revised higher.
Well, it won't be. Because while the BLS may seasonally adjusted and revise employment data to make the economy seem far stronger than it really is, when it comes to spending, every dollar leaving one pocket ends up in another pocket, and can thus be traced.
This is how Bank of America explains its total confusion why the US consumer so desperately refuses to follow the "recovery" script.
All signs point to a robust consumer: job growth has accelerated, with an average of 336,000 jobs created a month over the prior three months, gasoline prices have plunged and interest rates have declined. Consumers are taking notice with sentiment measures climbing higher. According to the University of Michigan survey, consumers have not been this upbeat since January 2004, when the economy was booming. The natural outcome should be for consumers to splurge, hitting the malls and going out to restaurants. But much to our surprise, the data suggest otherwise.
The BAC internal data show little improvement in expenditures in January, even after netting out gasoline and autos. Sales ex-gasoline and autos, on BAC credit and debit cards, was unchanged mom SA and have slowed over the past few months (Chart of the Month). And it is not unique to our data – the Census Bureau painted a weaker picture with the December report (however, as we argue in this note, we think the risk is that core control sales are revised higher on Thursday).
How can we explain this disconnect? It seems that consumers are saving some of the windfall cash from lower gasoline prices, with the personal savings rate increasing to 4.9% in December. Another factor is that our data may be skewed by consumers with credit cards who are not as budget constrained as those who spend predominately with cash. Looking at a breakdown of spending by key sectors, we find a pick-up in sales at home improvement stores, restaurants and grocery stores, but a slowdown in lodging and furniture sales.
And not just Bank of America. Moments ago Wells Fargo admitted the same:
- WELLS FARGO & CO CFO: CONSUMER SAVINGS ON LOWER GASOLINE PRICES NOT TRANSLATING INTO A PROPORTIONAL INCREASE IN SPENDING
And do you know why? Because, as we explained many months ago, not only is there not going to be an increase in discretionary spending, but all the "excess" money will be spent on - you guessed it - undiscretionary Obamcare, i.e., the government's latest tax for the middle class:
The same Obamcare which already led to a surge in GDP in both Q3 and Q4. And sadly for the propaganda-mongers, not even the BEA can triple-count seasonally-adjusted or actual data. That... and $1.1 trillion in student debt certainly doesn't help either.
In other words, expect yet another conspiracy theory to become unconspiracy fact in 5... 4... 3...