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Friday, March 13, 2009


retail crash may have stabilized

following on some really bad news a few months back, spencer at angry bear goes over the figures of the most recent retail sales release.

Of course some of this gain will be offset by falling inventories, but this is the first solid sign of an economic bottom to show up in the data. ...

This strength in retail sales probably stems largely from the impact of falling energy prices on real incomes. This together with the normal January increase in government pay, social security inflation adjustments and other transfer payments means that despite falling nominal private wage and salary payments in recent months real income still rose.

But it also means that the recent rebound in oil prices is especially dangerous. If energy prices continue to climb it means that the recent pop in real incomes could reverse and this would make it extremely difficult to sustain this improvement in retail sales.

hard to color this as sustainable, particularly in the face of state and municipal level cutbacks. but then, i doubt oil prices will rise much in this environment.

UPDATE: zero hedge cites the analysis of david rosenberg, as he looks back at a pretty dismal week for the economy.

4) Retail catches a tailwind

The Fed’s Beige Book actually hinted that consumer spending was no longer falling off a cliff in the past couple of months and that anecdotal view was backed up by the data that came out for February. Not only was January revised up to +1.8% (from +1.0%), but the gains held in February as the headline came in at - 0.1% versus expectations of -0.5% (and ex-autos were +0.7% on top of a 1.6% spurt in January). It seems strange to be seeing such a pickup in view of the fact that we lost 651,000 jobs in February and 655,000 in January, not to mention the collapse in consumer confidence to all-time lows. Be that as it may, the data are the data and many economists now are going to be headed back to the drawing board and revising their first quarter GDP numbers to be somewhat less negative than they were before (we had been at -6.5% SAAR for 1Q). Here are some possible explanations:

  1. Income tax refunds have been huge so far this year – up 40% YoY in Jan- Feb (a record $105 bln in Feb).
  2. 2. There has been a refinancing boomlet that has left money in people’s pockets – up 17% YoY in Jan-Feb.
  3. 3. The seasonal factor for February was also very aggressive (0.878 – i.e. looking for a 12% slide in the raw data) – in fact, it was the most aggressive SF in 12 years. The RAW data actually showed that retail sales slid 3.9% in February, which was the weakest sequential change on record (and half the time, in any given February, sales manage to rise before the seasonal adjustment is applied). We estimate that retail sales would have DECLINED 1.5% if a more normal seasonal factor had been deployed – so tread very carefully in interpreting this data.
  4. 4. There is some ‘noise’ around the data because in the three months to December, sales plummeted at a 26% annual rate. So we could also just be seeing a bit of a bounce from extremely depressed levels.

Areas that look better are clothing (which we highlighted in our Beige Book piece last week), electronics, pharma and e-tailing. All have posted back-to-back gains. Building materials, food and autos have been quite soft by way of comparison.

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