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Hmmm...

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for February, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $407.8 billion, an increase of 1.1 percent (±0.5%) from the previous month and 6.5 percent (±0.7%) above February 2011. Total sales for the December 2011 through February 2012 period were up 6.4 percent (±0.5%) from the same period a year ago. The December 2011 to January 2012 percent change was revised from 0.4 percent (±0.5)* to 0.6 percent (±0.2%).

Interesting -- and a bit disturbing.

As usual I look at the unadjusted numbers, and here we see gains pretty much everywhere -- except in food and beverage stores, health and personal care and sporting goods. In addition for the first time in a long time internet sales ("nonstore retailers") was down.

Remember that personal income wasn't up to any material degree, so one has to ask -- are we starting to see a camel poke its nose into the tent? Without real growth in personal income retail sales are only absorbed through debt increases, and that is not happening in the revolving area either.

So where's it coming from? Best guess: Transfer payments (that is, government borrowing!)

WASHINGTON (MarketWatch) -- The U.S. government ran a $231.7 billion budget deficit in February, the Treasury Department reported Monday. This is up substantially from the deficit of $222.5 billion in the same month one year ago. Receipts were $103.4 billion in February, the Treasury said, about $7 billion lower than receipts in February 2011. Outlays were $335.1 billion. This is $2 billion higher compared with a year earlier.

It's not going to work, and if the government borrowing and expansion of credit at that level ignites a spiral upward things will get ugly fast -- and torpedo the so-called "market gains."

This is the chimera we've been sold -- "inflation is only bad if it shows up in consumer prices -- if it's in assets it's good!" But expansion of the money and credit supply does not imply the ability to control where the inflation in prices appears.

The red light is blinking folks....

Source: Retail Sales: Inflation?