Retail Sales Show Inflation, Not Growth

If you ever doubt the significance of the market's relative overbought/sold condition to news, the past two days have been quite instructive. Yesterday's ripper on the Buffett muni bond news (the Ambacs (ABK) of the world ended the day lower), and today's response to what was an easily parsed weak Retail Sales data show that it's the environmental market conditions the news enters, and not necessarily the news itself, that matter most.

Consider:

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 $382.9 billion, an increase of 0.3 percent (±0.5%)* from the previous month and 3.9 percent (±0.7%) above January 2007.

'Not for price changes' means that these are nominal -- not inflation adjusted -- numbers.

Hence, with Gasoline station sales up 23%, and non-store retailers (home oil delivery) up 10.6%, the surprise gains were all energy/inflation related.

I have to wonder about the boost in demand for cars, considering what we have heard from all the auto makers -- they almost across the board announced weaker sales. I don't know what the Commerce department is looking at, but I cannot figure how its a positive sign for the economy.

Take the Retail Sales EX Inflation (gasoline, food & beverage) and retail sales were DOWN. Excluding inflation, demand at all other retailers last month were unchanged to negative. Economically, speaking, how bullish is that?

Chart courtesy of Barron's Econoday

Sources:

ADVANCE MONTHLY SALES FOR RETAIL TRADE AND FOOD SERVICES
JANUARY 2008
WEDNESDAY, FEBRUARY 13, 2008 AT 8:30 A.M. EST
Commerce Dept, Service Sector Statistics Division
http://www.census.gov/svsd/www/retail.html

U.S. Retail Sales Unexpectedly Rose 0.3% in January
Shobhana Chandra
Bloomberg, Feb. 13 2008
http://www.bloomberg.com/apps/news?pid=20601087&sid=am.WFHwnr_5s&

Comments

[GKM:]

The market is trying to make bullishness out of whatever it can at this point. We're at that point in the cycle. It will work until it doesn't work but the fundamentals will always dictate the outcome. Barry has pointed out the fundamentals, and they don't look so good.

2008 Feb 13 05:17 PM

[TraderMark:]

Amen. I said the same thing. But you can't talk to a raging herd of humans desperate for any piece of good news. My comment was not even 5 days ago we heard from the retailers themselves, yet we ignore everything they say to jump on a government report :) Wonders never cease.

2008 Feb 13 05:26 PM

[tjschoenlein:]

A little humor, Tradermark- You are right, you can't talk to a raging herd of humans who only want the sky to fall.. oops..it works both ways.

2008 Feb 14 02:33 AM

[pochovilla:]

The attention span of the average person is about ten seconds. The herd moves on "headlines" and 10 second snippets without context. Except for a rare few (Kill the messenger) who can put meaning behind the "data" or "possible facts" the pundits grab 90% of the headlines.
Consider the following:
"It's hard to change people's minds with facts" Thomas Sowell

“The market can remain irrational longer than you can remain solvent.” - John Maynard Keynes
As I tell my daughter in Manhattan, "My advice and $10.00 may get you a cup of coffee at Starbucks"

2008 Feb 14 08:26 AM

[cynic69:]

Wait! Wait! Wait! The 2000 pound gorilla with hand on the switch is the price of crude (edging toward $100). His affect is pervasive (not just gasoline) and deadly.

2008 Feb 14 11:45 AM