Pay More, Get Less

Last week, we noted a deceptive rise in Retail Sales that was driven by price increases, not sales gains. Measured in real terms, the inflation adjusted change in year over year sales actually dropped back to levels not seen since 2003.

The NYT's Floyd Norris hammers this point home Saturday:

"FACED with tightening credit and a slowing economy, America’s consumers are being forced to scale back their purchases, but high prices of necessities are keeping their overall purchases rising at a reasonably strong rate.

The retail sales report for January showed overall retail sales that were stronger than many economists had expected, and was well received by the stock market on Wednesday, the day it was released. In total, retail sales are running more than 4 percent over the level of a year ago, an increase that is above the overall inflation rate and much stronger than the sales were when the last recession began in early 2001.

But the overall change is misleading. One reason for its strength is that prices of necessities are up sharply over the past year, meaning that those items consume more and more of the household budget, leaving less for other things.

Over all, Americans are spending about 13 percent more on food and energy now than a year ago. The figures, as are all the figures shown in the charts accompanying this article, are based on three-month moving averages of seasonally adjusted figures, and compare this year with last year." (emphasis added)

The chart below is rather telling:

Chart courtesy of NYT

The actual rate of sales today is better than it was as we entered the 2001 recession. Much of that positive appearing difference, unfortunately, is inflation . . .

Previously:
Retail Sales Show Inflation, Not Growth http://bigpicture.typepad.com/comments/2008/02/retail-sales-sh.html

Real Retail Sales Fall to 2003 Levels http://bigpicture.typepad.com/comments/2008/02/retail-sales-ga.html

Source:
Buy Less but Pay Lots More, and Get a Misleading Rise in Sales
FLOYD NORRIS
NYT, February 16, 2008
http://www.nytimes.com/2008/02/16/business/16charts.html

Comments

[GerryB43:]

Inflation is not the change in the relative price of a good or service; it is the change in the purchasing power of the unit of account. Rising relative prices of food and energy are now, unfortunately, linked thanks to the ethanol lobby. With the Fed still pursuing (mostly) a price rule for monetary policy, that means that other prices must fall.

2008 Feb 18 08:51 AM

[Sr. Pessimist:]

I realized something. I myself invented a technology long ago that can be used to power robots to perform the same labor as Chinese slaves under whip and chain. It's called "artificial intelligence." America can remain a consumer economy, and we can make robots powered by computers to do the same labor any unskilled laborer can do. AI was my opus (or so I considered at the time).

A weak US Dollar makes for an extremely formidable export economy, given artificial intelligence is properly implemented. A weak currency is good for the economy if people use my AI technology to replace unskilled labor. Then US goods are cheaper than all other goods worldwide, for us as well as everybody else.

Artificially intelligent robotic labor equity at the mere fixed cost of the manufacturing of the robot, plus the ongoing cost of power and maintenance.

2008 Feb 18 10:13 AM

[Sr. Pessimist:]

In fact, I published my theoretical design on the Internet. I voluntarily offered my great work to the world so it could be put to a great use by all.

Subsequently I developed compounding binary relations. It can serve as the critical tool to make vast banks of knowledge available to be processed so as to make artificial intelligence on a computer limitlessly formidable.

Skilled labor is easily possible on machine sentience.

Not even cheap Indian and Chinese programmers can match the power of a grid of sentient machines following your instructions tirelessly and effectively. We don't need unskilled labor, and we don't need semi-skilled labor.

In fact, if done properly (and that's a major if), everybody could live a real nice easy life. There is a cogent theoretical approach to controlling the machines so as to balance them against running amok.

Interesting. The US Dollar's weakness is competitively a good thing. I just wasn't arrogant enough to add myself to the equation. Well, with my development of sentient robotic labor and my development of the #P class of algorithms, labor shouldn't be at very much of a shortage for long. Not for an economy, and not for a military.

It's hard to already be arrogant, but realize I have to be even more arrogant to be accurate. I feel just like an arrogant prick. Is there any limit to how arrogant I have to be to be accurate? :)

2008 Feb 18 10:20 AM

[gordon:]

IT WAS SPENDING ON GASOLINE. Barry's right, take it out (ex-auto sales, which is standard), worst since 2003. I hope you know Bush is now shutting down the economic indicator site BEFORE THE ELECTION!
NO OUTCRY IN THE MEDIA?
www.opednews.com/maxwr...

2008 Feb 18 11:28 AM