Let’s take a quick look at the Retail Sales data, and put to rest some amusing theories about the resilience of the consumer.
The spin has been all positive since the data came out. Expectations were for a rise of 0.3%, according to a Dow Jones survey, based upon the huge drop in gasoline prices. Earlier in the week, I heard a talking head on CNBC opine he would be surprised if Sales didn’t exceed that, given all the newfound cash in consumers pockets thanks to energy savings.
Surprise! Retail Sales decreased by 0.4%, according to the Commerce Department (seasonally adjusted data). August sales were revised down to a 0.1% increase from a 0.2% increase.
Now for the fun part: Retail Sales can get reported in a variety of "EXes;" Ex-Auto, and Ex-Gasoline are tow more common versions. Ex-Gas retailers, and sales were up 0.6%; Ex-autos, and sales were down 0.5%. Excluding both autos and gasoline, all other retail sales increased 0.8% in
What can we learn from this? Quite simply, despite the huge drop in gasoline prices, total sales were still off nearly half a percentage point in September. (I’ll mercifully spare you of any further zero sum discussion).
One might have thought that, given all of the dollar savings at the pump, at least an equivalent amount of dollars would have been plowed back into the economy. Indeed, the new found energy savings could have led to a wealth effect, leading to more big ticket items — including cars.
Nope. But taking a page from the school of inflation ex-inflation, if we remove the items that went down in sales, we can reach the conclusion that sales were not punk.
UPDATE: October 14, 2006 7:58am
Funny, if you go abroad, the view from afar of U.S. Retail Sales is far less enthusiastic than that of the local cheerleaders:
US: September retail sales unexpectedly down (-0.4%)
BNP Paribas, Caroline Newhouse-Cohen, Oct 13, 2006
Another edition of our new series: Blog Spotlight.
We put together a short list of excellent but somewhat overlooked
blog that deserves a greater audience. Expect to see a post from a
different featured blogger here every Tuesday and Thursday evening,
Next up in our Blogger Spotlight: James Picerno is the editor of The Capital Spectator (capitalspectator.com), a blog focused on economics and investment
strategy. He is also a senior writer for Wealth Manager, a trade
magazine for financial advisers to wealthy individuals. He has been a
financial journalist since the late-1980s.
Today’s focus commentary looks at:
The head of the self-proclaimed "authority on bonds" says the rate hikes are history. PIMCO’s Bill Gross wrote in his October Investment Outlook that "the Fed is done and ultimately will have to lower interest rates in order to restimulate an asset based/housing led economy that has been its primary growth hormone in recent years."
The underlying assumption in his projection is that inflation is "leveling off" and the economic growth rate is "moving towards a 2% real growth rate or less in the next year or so…." As such, the Fed "at some point in 2007 will be forced to cut short rates." Timing and magnitude are yet to be determined, he adds.
In fact, the future may be more complicated than it appears. Economist Robert Dieli of NoSpinForecast.com documents the finer points of this complexity by plotting the history of economic cycles against instances of inverted yield curves. As he illustrates in the chart below (which, alas, we’ve squeezed a bit from the original to fit into the confines of CS), there’s a lengthy history of yield-curve inversions accompanying economic contractions and a drop in the Fed funds rate shortly after the yield inversions arrived. But that doesn’t mean the past is prologue, at least not a prologue that’s clear and obvious.
Category: Blog Spotlight
This is another of our new features: Blogger’s Take. It is inspired by — a nice word for stolen — the WSJ’s Economist’s Take, which they post after major economic data releases.
We wanted to do something a bit more informal: Looking at different subjects a bit more in depth, and take in some perspectives from a broad variety of bloggers (as opposed to a narrow slice of Wall Street Dismal Scientists.
Here are our first half dozen responses to the question: "What Up With Employment?"
"A striking characteristic of the US non-farms job data since the trough of 2002 is that recovery growth is the weakest since records began in 1939 (uncertain BLS September revision notwithstanding). Even the brief and frail recovery between the 1980 and 1981 recessions was stronger. It may be that growth has not yet peaked – but that would make this jobs recovery the slowest to pan out on record.
Moreover, the latest non-farm payrolls data paints a picture of deterioration, particularly in construction and related industries. Whilst both the unemployment rate and hourly earnings data stuck out as good news, the fact is they are lagging indicators. The Fed has ammo to hold on this data; but should coming months show job losses (not outlandish) they might still choose to wait on clearer inflation (and BLS) data before contemplating the wisdom of cuts."
- Rawdon, Capital Chronicle