Friday, March 16, 2012

The Truth Behind February's "Strong" Retail Sales Report

I put off doing an analysis of February's retail sales report until the CPI for February came out. I wanted to know how much of it was just inflation.

In the following chart I'm adjusting the sales for population growth (which I ballpark estimated to be 170,000 for February) and inflation as seen in the consumer price index.

Click to enlarge.

53% of the real increase per person came from gasoline stations. The total rises to 86% if we throw in motor vehicles. And lastly, it rises to 97% if we throw in building supplies and gardening equipment.

So let's try to make some sense of why these three things are driving growth.

March 2, 2012
Automobile Sales Rise in February by 16% With Increasing Demand for Fuel Efficient Cars

Auto sales in the U.S. picked up to the fastest rate in four years strengthened by the climb in sales of fuel-efficient vehicles as gasoline prices continued to surge.

That takes care of gasoline and motor vehicles.

March 13, 2012
Get going on the garden

TORONTO - Have you heard there’s a a food revolution going on?

More specifically there is a grow-your-own revolution happening around the world.In fact one of the top trends in gardening in 2012 is vegetable gardening, and with this mild start to March, many are thinking about popping out some peppers this summer.

Rising gasoline prices are pushing up the price of food. This certainly helps explain at least some of the increased gardening equipment demand.

As seen in the chart, clothing did well too. I would guess that people want to look sharp at their next job interview, especially with unemployment at 8.3%. Rumor has it that at least a few companies have decided to hire a few workers, well, at least until the next recession (whenever that is).

And lastly, no report would be complete without at least a bit of heckling and sarcasm. So brace for it.

March 14, 2012
Retail Sales Flex Their Muscles in February

This is a very healthy number and shows that retail and consumers are still alive and well.

I'm not seeing it.

Let's address gasoline front and center. It was the fastest-growing part of the number. It wasn't because people bought more gasoline, it was because gasoline cost more.

Oh yes, that's prosperity all right. No doubt about it.

So gasoline grew 3.2%, and it is a meaningful contributor to the index. That certainly was a help.

It was a help? To who? And the 3.2% growth number clouds all the useful information. Gasoline station sales represented a whopping 53% of the inflation adjusted per capita growth! That's what the data shows.

If you strip out the autos and the gasoline effect, we were still up 0.6% sequentially or about 7.2% annualized. Or if you look on the year-over-year basis, which is a good way to look at it, we were still up 5.8%. Both are very healthy numbers.

As seen in my chart, if you strip those two things out then there is almost no real growth per capita left. Seriously.

Well, the bigger question is almost what didn’t do well because only one category was actually down. It was kind of good across-the-board. But there was a lot of strength.

Look at the chart again. There was little *real* strength across-the-board. He's dreaming.

Building materials also was good, up 1.4% month to month, but that might be because people are starting their gardening a little earlier and maybe doing a little bit of home fix-ups, too.

It might indeed be that people are starting their gardening a bit earlier, especially if they are hungry in this brave new economy. 15% of our population is on food stamps. No joke. So let's talk about that warm weather we've been having.

March 14, 2012
Is Warm Weather Putting a False Shine on the Economy?

With a national average temperature of 38.3F, this February was 5 degrees warmer than last February and 4 degrees warmer than the last five Februarys. Going back to 1920, this is the fourth-warmest winter on record. According to Bank of America Merrill Lynch (BAC) U.S. economist Neil Dutta, those high temperatures skew the seasonal adjustments the government makes to winter economic data in order to compensate for lower activity. “If the winter is unseasonably mild, those seasonal adjustments aren’t appropriate,” says Dutta. “It’s overcompensating, which makes the data look better than it is.”

If this "strong" report does look better than it really is then you might want to think a bit defensively. And why is that? In my opinion, February's retail sales report already sucked (pardon my language). This just makes it worse.

Chances are incomes won’t grow much over this spring, which means that if you spent money in January and February you hadn’t intended to, you probably won’t have much to spend come April or May. But look on the bright side: At least the warm weather comes free.


Anonymous said...

Hello Mark, I think there should be some yoy "improvement" in the numbers due to the 3+% cost of living adjustment I recall reading about late last year. The retirees, government employees and some union workers get it, though in the case of retirees I think they also gave some back in Medicare hikes.
Anon PA

Stagflationary Mark said...


I like how you used the quotes around the word improvement.

Isn't inflation wonderful? It is sure to bring the prosperity each and one of us deserves, lol. Sigh.

Stagflationary Mark said...

In the spirit of quote marks...

When I say "real" prosperity I actually mean the following. Sigh.

March 5, 2012
Economy rebounds, but food stamp use still climbing

In fact, household participation has been climbing so steadily that it has far surpassed the last peak (which looks like a minor blip by comparison) set as a result of the immediate fallout following hurricane Katrina.

Stagflationary Mark said...

Yet another thought.

Building materials also was good, up 1.4% month to month, but that might be because people are starting their gardening a little earlier and maybe doing a little bit of home fix-ups, too.

There is a family up the street who did some home fix-ups in the form of gardening over the last month, so I think he's really onto something here.

I should probably mention that he's been trying to sell his house. I think he's been trying for about a year. He keeps lowering the price to just above what the market is apparently willing to pay. It makes me think he's involved in the circus industry. He's got falling knife throwing down to a science, lol. Sigh.

Is this anecdotal evidence of prosperity though? I think not.

As a side note, at least he's removed "This is not a short sale!" from the flyer. I can only imagine how many people that scared away. In my opinion, a seller should never use the word "not". It exudes negative waves.

Kelly's Heroes Oddball - Negative Waves

mab said...


Nice analysis! Way too insightful and honest for mainstream CONsumption though.

On a macro basis, the entire system is a mess. The only thing keeping the system from collapsing is Gov't deficit spending. The same deficit spending that Mitt Romney claimed was "crushing" us last night on the Sean Hannity CONservative propaganda show.

The upcoming presidential election is a non-event. Obama and all the Republican candidates are each clearly beholden to the current crony capitalist system. They've all been carefully vetted!

I think I'll stay home on election day and save some gas!

Stagflationary Mark said...


I think I'll stay home on election day and save some gas!

With the money you save, be sure to shop at one of this country's many nonstore retailers!

You'd be a whiz kid like Eddie Lampert, lol. Sigh.

The billionaire hedge fund manager has since presided over 18 consecutive quarters of declining sales. He’s on his fourth chief executive. While Sears Holdings Corp. shares soared in the first few months after the merger, they’ve fallen 55 percent in 2011 alone.

The good news is that it is up 162% so far in 2012. The pace will no doubt continue! It should be worth more than within the next few years. And why is that? With a negative 7.55% profit margin(ttm) and negative $29.40 per share earnings(ttm), what's not to like? Short covering prosperity for the long-term win! ;)

March 16, 2012
Sears to Close 62 Stores in 1H to Cut Costs

Lampert, who is Sears’s chairman and controls about 60 percent of its shares, is spinning off units to generate cash and closing stores after the company posted its largest quarterly loss in at least nine years.

mab said...


Oil made a "nice" move today - up 2% to over $107/bbl.

It looks like Bernanke has succesfully gotten credit flowing again....... into equities and oil.

Like Lampert, Bernanke is quite the financial "craftsman". Too bad that neither of them are capable of producing any real wealth.

Stagflationary Mark said...


Slow and steady wins the race.

fried said...

Nice analysis. Got my lease renewal, 3.5% for one year, 7.25% for 2...this in NYC, rent stabilized apt., increases mandated by city. This with landlords saving plenty on fuel costs due to incredibly warm "winter".
My own tiny biz holding steady, not up or down. Don't own a car, don't have a yard to only expenses food, dog food, and maybe a new pair of sneakers. Just not spending, trying to save. I guess I am not participating in the recovery...but it feels to me like a lull...not a directional movement.

Stagflationary Mark said...


3.5% increase. Ouch.

Meanwhile, my property taxes dropped as did the value of my property. Granted, I don't live in NYC.