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Posts Tagged ‘retail sales’

How Can Rick Davis Project 2nd Qtr GDP at -1.5%? This is a MUST Read, Listen, Learn!!

Posted by Larry Doyle on March 29th, 2010 7:17 AM |

If the American consumer represents 70% of our economy, shouldn’t economists study consumer spending as much as possible? Well, one individual, and he is not a trained economist,–he is actually a physicist by trade– has done and is doing just that. Who is this visionary? Richard C. Davis of the Consumer Metrics Institute.

I hosted Richard on my radio show, No Quarter Radio’s Sense on Cents with Larry Doyle Welcomes Rick Davis, last evening. If you have any interest in the economy (and if the economy is even peripherally linked to the markets), you MUST listen to this interview. Those who follow my work know I am not one taken to hyperbole, but last evening’s show was as good as it gets in terms of cutting edge analysis on the economy focused specifically on the consumer. (more…)

Is a Jobless Recovery a Recovery?

Posted by Larry Doyle on November 16th, 2009 2:20 PM |

Cartoon by Steve Breen, The San Diego Union-Tribune

Jobless recovery seems to be a phrase economists and analysts are using with increasing frequency. In my opinion, this usage is akin to a drug dealer or liar repeating his rationalizations to the point where he believes his own bulls%&t.

Are we to believe this economic subterfuge? I believe the American public buys into this rationalization at our peril. Why? Let’s navigate along the most important leg of our economic landscape.

Our unemployment rate currently stands at 10.2% while the underemployment rate is 17.5%. On the heels of the unemployment report released on November 6th (see my summary here), many analysts and economists revised their projections for unemployment to 11% and some as high as 14%.

Just today, Fed Chair Ben Bernanke in a speech at the Economic Club of New York highlighted the fact that the current excess supply of labor in our economy is even worse than indicated. Ponder that for a second. The lead banker in our nation is telling us that our unemployment situation is even worse than statistics would indicate. What does that mean? (more…)

Retail Sales Stronger Than Expected? But What About The Revisions?

Posted by Larry Doyle on October 14th, 2009 9:54 AM |

When the going gets tough…the tough American consumer goes shopping, right? Do the virtues of thrift and frugality truly stand a chance in America? Let’s review the recently released Retail Sales report and navigate this leg of our economic landscape.

The Wall Street Journal provides a snapshot of the surprisingly strong headline number, but dare I say the WSJ does not provide a full comprehensive review. That’s ok, though, because the equity market futures are driving higher on the headline so why should we dig deeper and spoil the fun? Well, I’d be neglecting my mission here at Sense on Cents. Let’s navigate.

Highlights

The consumer pulled back sharply in September-but it was mostly due to the post-“clunkers” drop in auto sales. Otherwise, the numbers were surprisingly healthy for the most part. Overall retail sales in September dropped 1.5 percent after a 2.2 percent spike the month before. The September drop in sales was not as severe as the market forecast for a 2.1 percent fall. The decline was led by a 10.4 percent plunge in auto sales after a 7.8 percent boost in August. Excluding motor vehicles, retail sales advanced 0.5 percent, following a 1.0 percent jump in August. The consensus had expected a 0.3 percent rise for September.

In typical fashion, the focus on the current month’s outperformance is not properly measured in the context of the previous month’s downward revision. If The WSJ wanted to provide real integrity in its reporting, it would provide an equal weighting to the revision in conjunction with the actual report. In doing so, we witness that this month’s so called outperformance is almost uniformly balanced by last month’s downward revision. We witness a similar dynamic at work in Retail Sales excluding auto sales, as well.

By incorporating the revisions, retail sales over the last two months show a marginally positive trend, but hardly the ‘surprisingly healthy’ review provided by The WSJ and other market mavens.

Checking on the other volatile component, gasoline sales provided lift, gaining 1.1 percent in the latest month.

Is this an indication of increased consumer confidence and thus the willingness to travel more, or merely a function of increased prices for gas . . . or perhaps a combination of the two? To tout it as a pure positive is disingenuous.

Nonetheless, excluding motor vehicles and gasoline, retail sales rose 0.4 percent, following a 0.6 percent gain the previous month. Although core components were mixed, they were mostly positive and reflected sizeable gains. Apparently, the consumers that have jobs are a little more optimistic and are willing to spend.

Again, not a clear cut overwhelmingly positive trendline, despite what The WSJ may want to report.  I still maintain we are, at best, a third of the way into our marathon towards a newly defined Uncle Sam economy. As such, it is still prudent to assess where we are in the grand scheme. To that end:

Overall retail sales on a year-ago basis in September improved marginally to down 5.7 percent, from down 5.8 percent in August. Excluding motor vehicles, the year-on-year rate increased to minus 4.9 percent in September from down 6.3 percent the previous month.

Enjoy the ride higher in equities, but don’t get overly caught up in the euphoria. Analysts may neglect to properly measure revisions, but we do it at our peril if we want to properly navigate the economic landscape.

LD

Economic Update: Housing and Retail Sales

Posted by Larry Doyle on May 13th, 2009 8:39 AM |

Ultimately, all economic roads lead back to the housing market. The breakdown in the integrity of housing finance led us into this economic mess and any self-respecting economist (or financial commentator) will tell you that a healthy housing market will lead us out. Let’s check the patient.

The Fed has supported housing by effectively “overpaying” for refinancings. Mortgage rates relative to rates on U.S. government debt are at 17 year narrows. This development is great for homeowners who can and have refinanced. However, the pool of eligible homeowners is finite and seems to have run its course for now as recent data indicates that refinancing filings have declined while purchase activity has been unchanged. This data is reflected in the U.S. MBA Mortgage Applications Index Fell 8.6% Last Week, as reported by Bloomberg.
  
How about new supply of homes coming onto the market? Well, certainly home building has come to a virtual standstill with over a year’s worth of homes currently on the market. As new housing starts occur this supply can be gradually absorbed. Thus, we once again are back to the concept of needing time for the patient to heal. However, are we subject to another bout of housing sickness to hit our economy? I believe we are. Why? Two reasons:

   1. government programs forestalled but did not eliminate a number of “sick” mortgages. These mortgages would likely have defaulted with banks forcing foreclosures a few months ago.

   2. a large supply of adjustable rate mortgages will soon reset to a considerably higher rate leading to payment problems for homeowners and likely foreclsoures. Data indicating increased rates of delinquency (late payments) clearly points to increased foreclosures.

In fact, foreclosure filings just hit a record level of 342k  as reported by RealtyTrac which monitors this data nationwide. Foreclosure activity also seems to be spreading from California, Florida, Nevada, and Arizona to other parts of the country.  In fact, Idaho has recently had a surge in foreclosure activity as the unemployment rate in and around Boise has spiked.

What about home prices? The declines in home prices have certainly sparked renewed interest in prospective homebuyers. Will they enter the market at this stage? Data indicates prospective buyers continue to be patient as Bloomberg reports, Home Prices In U.S. Drop Most On Record In Quarter.

When may consumers feel confident enough to enter into the market and purchase a home? The largest factor in that decision is consumer’s confidence in their employment situation. In my opinion, with the rate of unemployment nationwide likely to hit double digits by year end, housing will remain under pressure. 

On a separate economic note, the retail sales figures for April were just released and declined .4%, and excluding auto sales, declined by .5%. The market expected April retail sales to be unchanged. This report is a clear indication the economy remains on life support. Not surprising to me, March retail sales were revised even lower from a decline of 1.1% to a decline of 1.3%.

With all due respect to credible journalists, analysts, and financial commentators, I personally do not see enough green shoots in the midst of reviewing the entire economic landscape.    

The equity markets are moving sharply lower on this news.

LD

P.S. Sense on Cents welcomes feedback. Let us know what you are seeing in your local economies.

Economic Update April 14

Posted by Larry Doyle on April 14th, 2009 12:57 PM |

We received a mixed bag of economic news this morning. The WSJ provides a quick but fairly comprehensive analysis, U.S. Retail Sales Show New Weakness; Producer Prices Drop

In regard to the wholesale prices, the WSJ reports:

The Labor Department’s producer price index for finished goods fell 1.2% on a seasonally adjusted basis in March, after rising 0.1% in February. Core PPI, which excludes food and energy costs, was unchanged last month from February.

The PPI data showed energy prices sliding 5.5% last month, after rising 1.3% in February. Food prices were down 0.7%.

Prices of passenger cars fell 0.2%, while light truck prices declined 0.4%.

“Today’s PPI report emphasizes that deflation rather than inflation remains the primary risk for now,” IHS Global Insight economist Nigel Gault said.

On the retail sales front:

Retail sales fell 1.1% compared to the prior month, the Commerce Department said Tuesday. Economists expected a 0.3% increase in the key indicator of consumer spending.

The big drop followed increases in January and February that had ended a freefall in spending during the second half of 2008.

“It’s disappointing,” said Hugh Johnson, chairman of Johnson Illington Advisors in Albany, N.Y. “It tells us quite clearly that consumers continue to retrench, or are doing less borrowing and spending and more saving.”

(more…)






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