Central Perk: 15 feb. 2011

marți, 15 februarie 2011

Mish's Global Economic Trend Analysis

Population Adjusted Retail Sales and the "Real" Retail Sales Depression; 3 Factors to Consider Going Forward

Posted: 15 Feb 2011 03:24 PM PST

In Retail Sales Rise 7th Straight Month, Now Above Pre-Recession Peak; Making Sense of the Numbers; Housing and Auto Perspective I questioned whether retail sales are really rising and posted some charts of autos, housing, and sales tax data (the true measure of retail sales).

Housing is not a part of retail sales but housing does affect retail sales because of appliance sales, carpet, paint, fixtures, landscaping, etc.

This was my conclusion.

Car sales are not up in number, but they are up in price. The same applies to food, and many other items. Population is also growing. All of those things need to be factored into the equation.

Even if one accepts the retail survey is accurate (I don't because it misses too many small stores that went out of business and are still closed), real sales have certainly not recovered. That puts pressure on states because expenses, especially medical expenses and pension benefits have soared.

The Good News

The good news (if you believe it), is that retail sales are finally back to January 2008 levels.

The Bad News

State expenses are way higher than 2008
Job growth is anemic and will likely stay that way
Stimulus money has been spent
Congress is unlikely to bail out states
Interest rates are higher
Mortgage rates are higher
Gas prices are higher
Congress is seeking spending cuts
States are hiking sales and income taxes
Property taxes are rising in spite of falling home prices
Home prices are falling

Ironically, points 4, 8, and 11 are good things for the long-term health of the economy but economists will not see it that way because it will impact short-term growth.

Population Adjusted Retail Sales

I did not factor in population growth but noted that it should be done. "Dshort" did factor it in and has a nice set of charts that suggest The "Real" Consumer Economy Remains in Depression

Monthly Retail Sales With Regression Lines

The green trendline is a regression through the entire data series. The latest sales figure is 8.1% below the green line end point.

The blue line is a regression through the end of 2007 and extrapolated to the present. Thus, the blue line excludes the impact of the Financial Crisis. The latest sales figure is 16.1% below the blue line end point.

[Mish note: the above chart is not adjusted for population growth and income. The following chart is]

Population Adjusted Retail Sales

Consider: During the past 21 years, the U.S. population has grown by over 22% while the dollar has lost about 37% of its purchasing power to inflation. When we adjust accordingly, the rebound in retail sales from the bottom in April 2009 merely gets us back to the per capita spending during the late summer of 1999.

Retail sales have been recovering since the trough in 2009. But the "real" consumer economy, adjusted for population growth still in a state of depression — 8.3% below its all-time high in January 2006.

Dshort has some great charts. Inquiring minds will want to give his site a closer look.

Long Term Retail Spending Factors

Three factors that need to be discussed in light of retail spending trends are demographics, taxes, and changing consumer attitudes towards debt.

Demographics

Boomers are past their peak earning years and headed for retirement.
Boomers in aggregate will need to downsize their lifestyles.
Those wanting to downsize their houses and simplify their lifestyle have no one to sell to. This will keep enormous downward pressure on home prices.
Those fresh out of college cannot afford and will not buy the cars and homes their parents had.
Many college graduates are despondent over being hundreds of thousands of dollars in debt with no way to pay it back.
Student loans programs benefit no one but schools and teachers. Eventually students will revolt.

Taxes, Stimulus, Pensions

Many states are raising sales taxes, property taxes, income taxes and fees. This takes money out of consumer pockets to feed untenable wages and benefits for public union workers.
Cities and states are bankrupt over untenable public union wages and benefits. Either wages and benefits must fall or taxes have to go up.
The federal government will either raise taxes, cut spending or both. Either way will put a damper on growth and retail spending. Raising taxes will put a long-term damper on growth. Cutting spending is good for the long haul but will put a short-term damper on growth.

Changing Consumer Attitudes

There has been a massive secular change in consumer attitudes towards debts.
The trend is housing is towards cash-in refis from cash-out refis.
Banks are reluctant to lend except to the most credit-worthy borrowers.
Credit-worthy borrowers do not want to borrow.
Kids see their parents or grandparents arguing over debt, even losing their homes over debt, how vowed to not get in the same situation.

Retail sales are up but $150 billion in stimulus spending to states is going away. Spending cuts in Congress are coming. Pent-up demand for car sales will end, but pent-up need to dump housing inventory is building. Taxpayers are fed up, but many states are hiking taxes anyway.

All of those items place enormous headwinds on retail sales. It is quite possible the latest set of retail numbers is about as good as they get. That certainly is not priced into equities or nearly anyone's economic model.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Retail Sales Rise 7th Straight Month, Now Above Pre-Recession Peak; Making Sense of the Numbers; Housing and Auto Perspective

Posted: 15 Feb 2011 12:12 PM PST

Retail sales rose for the seventh consecutive month and are allegedly above pre-recession levels. Tax data seems to dispute that notion, as do auto sales and new home sales. The latter is not part of retail sales, but the furnishings that go into houses are. Let's take a look at this a number of ways to see if we can make sense of it all.

Retail Sales Rise 7th Straight Month

MarketWatch reports Sales at U.S. retailers rise 0.3% in January

Retailers' sales rose 0.3% last month as consumers spent more on gasoline, autos and online goods, the Commerce Department reported. It was the smallest increase since last July, however. Sales also rose 0.3% excluding the volatile automotive sector.

The increase in sales fell short of Wall Street's expectations. Economists surveyed by MarketWatch had forecast sales to rise by 0.6% overall and by 0.6% excluding the auto segment.

The government also revised sales data for December 2010 lower — to a 0.5% increase from 0.6% as originally reported.

"Spending growth has clearly lost some momentum," said senior U.S. economist Paul Dales of Capital Economics.

Stripping out gas and auto, retail sales rose a meager 0.2% last month. Sales dropped 2.9% at building-supply stores and declined 1.3% for retailers who sell hobby items, sporting goods, books and music.

Restaurants and bars also saw a 0.7% decline in sales — the biggest drop since March 2009.

Chart of Retail Sales

The above chart is courtesy of Calculated Risk who writes "Retail sales are up 13.7% from the bottom, and now 0.4% above the pre-recession peak. "

Here is a link to the Census Bureau Advance Monthly Retail and Food Services Report for January 2011.

Sales Tax Data

The only valid measure of retail sales is state sales tax reports. Unfortunately time does not permit a complete analysis. Not only would one have to look at 50 states, one would also have to adjust every state's tax collections for increases in sales taxes.

As a one-state snapshot, I frequently look at Texas to see what its trends are. Texas may or may not be a representative state, but it can provide some clues.

Texas Economy in Focus

Please consider the Texas Comptroller's Economic Outlook updated February 11, 2011.

Job growth, sales tax collections – both from business and consumer purchases – as well as automobile sales, signal that the Texas economy has emerged from the recent recession.

Another indicator that the state's economy has been comparatively healthy was the U.S. Bureau of the Census report that Texas added more people (nearly 4.3 million) than any other state between the census counts of 2000 and 2010.

Entering 2011, more than half the jobs shed by employers during Texas' shorter recession have already been recovered as our economy recovers more quickly than the U.S. as a whole. Nationally, only 13.4 percent of recession-hit jobs had been recovered ending 2010.

Texas and the nation returned to economic growth in 2010, with the nation increasing its GDP by 2.8 percent and Texas increasing its GSP by 3.4 percent.

Taxes

Texas sales tax receipts for January 2011 were 10.4 percent higher than for January 2010.
For fiscal 2010, state sales tax receipts were down 6.6 percent from fiscal 2009.
Motor vehicle sales tax collections for January 2011 were 19.6 percent higher than for January 2010.
The average core transaction price nationwide for a new car or truck during the first 15 days of December 2010 rose 12.5 percent to $28,484 from $25,326 in the first 15 days of December 2009.
For the first 15 days of December 2010, total national new auto sales were 555,997 units, up 9.9 percent compared to first 15 days of December 2009.
Nationally, leases accounted for 28.1 percent of new vehicle sales in November 2010, an increase of 15.6 percent from November 2009.

Stimulus Package

In Texas, an estimated $18 billion in federal stimulus money is flowing to state and local governments.

That looks pretty good. However, there was $18 billion in stimulus money that will be headed out the door. Moreover, sales tax receipts for fiscal 2010 were down from fiscal 2009, and 2009 was down from 2008. That is in spite of an influx in population.

Texas State's sales tax collections up again but not enough

On December 8, 2010 the Statesman noted Texas State's sales tax collections up again but not enough

Texas' sales tax collections in November increased 8.7 percent over the same month a year ago, marking the eighth straight month of growth, according to figures released by Texas Comptroller Susan Combs on Wednesday.

So far, the first three months of the fiscal year have generated about $5 billion through the sales tax including the $1.84 billion collected last month. The November collections reflect transactions in October.

While a marked improvement over last year, that first-quarter total is still around $400 million below the collections at the same point two years ago, which is a more telling indicator of the state's revenue situation.

The approved 2010-11 budget is based on projections that sales tax collections would hold steady in the first year of the budget and then increase by 7 percent in the second year.

The actual first-year collections were down about 6 percent. And the state is still not keeping pace with where it is supposed to be for the second year nevermind making up ground for the previous year's lackluster performance.

Did Texas finally catch up? I am not so sure. What happens when stimulus fades out?

Auto Perspective

Auto sales are well below the pre-recession totals. One way to make up for the difference is if average car prices are considerably up from late 2007. That seems likely as noted by Texas Comptroller Susan Combs.

"The average core transaction price nationwide for a new car or truck during the first 15 days of December 2010 rose 12.5 percent to $28,484 from $25,326 in the first 15 days of December 2009."

Housing Perspective

New and existing home sales are not part of retail sales. However, the appliances, furniture, landscaping, carpet, paint, remodeling work, etc., is.

New Homes Sales

The above chart from New Home Sales increase in December

New home sales certainly do not support the notion that retail sales should be improving. Those are incredibly dismal numbers.

Existing Home Sales

The above chart from December Existing Home Sales: 5.28 million SAAR, 8.1 months of supply

While new home sales do not support the notion of rising retail sales, existing home sales might. Certainly there was a huge spike in home sales related to various tax incentives, and the buyers of those homes are highly likely to re-carpet, buy new appliances, buy paint, improve landscaping, etc.

The question now, is where to from here?

"Real" Retail Sales

Finally, here is one chart that helps tie it all together.

"Real" means inflation-adjusted (price-adjusted). Car sales are not up in number, but they are up in price. The same applies to food, and many other items. Population is also growing. All of those things need to be factored into the equation.

Even if one accepts the retail survey is accurate (I don't because it misses too many small stores that went out of business and are still closed), real sales have certainly not recovered. That puts pressure on states because expenses, especially medical expenses and pension benefits have soared.

The Good News

The good news (if you believe it), is that retail sales are finally back to January 2008 levels.

The Bad News

State expenses are way higher than 2008
Job growth is anemic and will likely stay that way
Stimulus money has been spent
Congress is unlikely to bail out states
Interest rates are higher
Mortgage rates are higher
Gas prices are higher
Congress is seeking spending cuts
States are hiking sales and income taxes
Property taxes are rising in spite of falling home prices
Home prices are falling

Ironically, points 4, 8, and 11 are good things for the long-term health of the economy but economists will not see it that way because it will impact short-term growth.

Addendum:

Please see Population Adjusted Retail Sales and the "Real" Retail Sales Depression; 3 Factors to Consider Going Forward for additional charts and discussion.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Damn Cool Pics

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The Cost of Valentines (Infographic)
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75 Incredible "Looking Into The Past" Pictures

Mission Impossible Squirrel

Posted: 15 Feb 2011 04:17 PM PST

This takes place in England – the owners of the yard added each piece of the Rube Goldberg contraption slowly so that when the squirrel learned one section and got the nuts, they then added the next section.

Finally it ended with what you see on the clip! It took over 2 weeks to get to this point.

Britney Spears Modeling Pictures From 1998

Posted: 15 Feb 2011 04:03 PM PST

Remember when Britney Spears was a sweet, carefree, fresh faced brunette who wore really bad lip liner and oversized shirts? If you don't, allow us to take you down memory lane with these modeling pictures of the pop princess taken in 1998.

Epic Fails - Part 14

Posted: 15 Feb 2011 02:25 PM PST

People often act weird, do stupid things and make the most hilarious mistakes that transform into such funny fails as you'll see after the jump. We simply can't avoid failing, right?

Previous parts:
Epic Fails - Part 1
Epic Fails - Part 2
Epic Fails - Part 3
Epic Fails - Part 4
Epic Fails - Part 5
Epic Fails - Part 6
Epic Fails - Part 7
Epic Fails - Part 8
Epic Fails - Part 9
Epic Fails - Part 10
Epic Fails - Part 11
Epic Fails - Part 12
Epic Fails - Part 13

The Magic Roundabout

Posted: 15 Feb 2011 01:28 PM PST

The Magic Roundabout in Swindon, England was constructed in 1972 and consists of five mini-roundabouts arranged in a circle. It is located near the County Ground, home of Swindon Town F.C. Its name comes from the popular children's television series The Magic Roundabout. In 2009 it was voted the fourth scariest junction in Britain.

It may be saying something negative about the town if its most notable feature is a traffic junction, but the Magic Roundabout is truly a wonder of the world. And by "wonder" I don't mean "wow" I mean "I wonder why they built such a stupidly complex junction".

You see, the Magic Roundabout is in fact 5 small roundabouts surrounding one large centre roundabout. For the benefit of our non-British visitors I shall do my very best to explain.

In the U.K. we drive on the left hand side of the road, so on approach to a roundabout you give way to traffic coming from the right hand side. You then go clockwise around the roundabout, exiting where you see fit.

The Magic Roundabout complicates matters in that the moment you leave one roundabout you are at the junction of another. So, by aiming right on each roundabout you would actually traverse the central roundabout in an anti-clockwise manner. At least that's the idea.

The Best Of Hipster Little Mermaid

Posted: 15 Feb 2011 01:14 PM PST

Remember hipster kitty? Me neither.

The Cost of Valentines (Infographic)

Posted: 15 Feb 2011 01:02 PM PST

How do we love Valentine's day? Let us count the ways.
In total, Americans spend approx. $13 billion per year on Valentine's day. 63% of consumers celebrate Valentine's day. On average, each one will spend $120 on Valentine's day gifts. Men spend twice as much as woman.

More Infographics.

Click to Enlarge.

Source: onlineaccountingdegree

Woman Casually Snacks On Her Own Poop

Posted: 14 Feb 2011 08:37 PM PST

I always see amazing things and knew it was only a matter of time before i was able to get someting spectular on video!!enjoy The Amazing POO MUNCHER WOMAN!!!This is 100% genuine!!!

75 Incredible "Looking Into The Past" Pictures

Posted: 14 Feb 2011 06:22 PM PST

Imagine how drastic your landscape would be if you altered just one aspect of it. These fascinating pictures merge the past with the present with very impressive results. The contrast in the photos will make you appreciate just how much progress we've made since back then.