Sunday, February 28, 2010

Retail Sales Rise: Where? Let's Take a Look; Expect Nothing Less Than Panic

In response to For 15 Million Unemployed any Job is a Good Job; Questions for Pollyannas; Wishes Aren't Fishes reader "Sunny Jim" asks ... http://globaleconomicanalysis.blogspot. ... ob-is.html

Mish

What puzzles me is that with such large numbers of people without jobs or adequate jobs, how can retail sales continue to hold their own? If people still had their house ATM or were increasing their credit card debt, I could see how they could keep spending at pre-recession levels. But people are paying down debt, not increasing it. Something just doesn't jibe IMO.

With the current job situation, I would expect to see retail sales at something like 90% of the bubble years sales. Do you have any retail sales data that verifies the stress in the employment situation?

Advance Retail Sales

In essence, Sunny Jim is questioning the January 2010 Advance Retail Sales Report from the US Census Bureau, released on February 12. http://www.census.gov/retail/marts/www/retail.html

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for January, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $355.8 billion, an increase of 0.5 percent from the previous month and 4.7 percent above January 2009.

Total sales for the November 2009 through January 2010 period were up 4.3 percent from the same period a year ago.

Retail trade sales were up 0.5 percent from December 2009 and 5.3 percent above last year. Gasoline stations sales were up 29.0 percent from January 2009 and nonstore retailers sales were up 12.4 percent from last year.

Gasoline Sales

The only thing believable in the census bureau report is rising gasoline sales in terms of dollars spent, not gallons sold. The latter is a measure of real demand.

Here is a chart of real energy remand from the Department of Energy.



Demand is down but gasoline sales and sales taxes are up because price has soared.

Methodology Is Completely Bogus

To understand why the Advance Retail Sales report is completely bogus, we must first analyze the Census Bureau Methodology.

The advance estimates are based on a subsample of the Census Bureau's full retail and food services sample. A stratified random sampling method is used to select approximately 5,000 retail and food services firms whose sales are then weighted and benchmarked to represent the complete universe of over three million retail and food services firms.

My Reply To Sunny Jim

Sunny Jim
Retail sales are not what they seem

I have written about this before but not enough. The published numbers are based on "same store sales". Think about all the companies that have gone bankrupt. Take Circuit City for an example. Gone. The doors are closed. Some of those shoppers went to Best Buy where same store sales rose.

Also remember that Best Buy and many other chains closed weak stores. The result: same store sales went up again.

Government methodology for reporting retail sales is based on sampling stores in existence. It does not factor in stores not in existence but recently were. Nor does it handle closed stores when the chain is still doing business.

Government reporting of retail sales is fatally flawed.

To understand what is going on, all one has to look at actual tax data. Heard any rosy numbers from states about sales tax collections?

Let's take a look at some real numbers.

New York

Sales tax collections worst in recent history http://www.eveningtribune.com/news/x593 ... nt-history

Feb 28, 2010

As if there wasn’t enough proof of an aching economy, the Office of the State Comptroller recently issued a report on the sales tax collection for all counties in New York state in 2009, providing even more evidence that the economy is struggling.

The report released by State Comptroller Thomas P. DiNapoli compares 2009 to 2008 collections, and found a 5.9 decrease in collections statewide.

Sales tax-declines were experienced by 53 of the 57 counties in the report. Only four — Chatauqua, Oneida, Schuyler, and Seneca — counties experienced a growth in sales tax revenue, but the report attributes it to other factors other than economic growth, like late payments and other technical adjustments.

“Unlike other recent downturns, 2009 was the first time in recent history that there was actually a decline in county sales tax revenue — a sign of the severity of the recent recession,â€