Are Retail Sales Bottoming?
The latest retail sales news was followed by a fairly bearish commentary. However, I disagree with this sentiment for the following reasons.
Here is a chart of the month and year over year percentage changes
The month to month percentage change dropped hard in the last quarter of last year. However, the month to month rate is now moderating and is clustering around 0%.
Above is a chart for the month to month percentage change in durable goods purchases. Notice the large drop off at the end of last year in the fourth quarter. However, we saw a jump in January followed by two months of declines. But the overall level in the first quarter was higher than the 1st quarter of last year. In addition, the overall 6-month trend is higher.
For non-durable goods purchases, notice that 5 of the last six months have clustered between the $2.320 and $2.340 trillion level.
Finally, consider these charts from Pollster.com
The percentage of people who think the economy is getting better is increasing. This number has been increasing since late February.
The percentage of people who think the economy is poor is decreasing and the number of people who think the economy is fair is increasing.
The percentage of people who think the country is on the right track is increasing.
These charts indicate the public mood is clearly changing for the better which at a minimum will provide a floor on consumer sentiment.
Let me make clear: I don't think we're going to have a gangbusters, consumer led recovery. The US consumer still faces a weak job market, massive debt and a big destruction in his wealth over the last few years. This is not an environment where people will go out and spend. However, I do think that the overall trend of durable, non-durable and retail sales numbers indicates the decline is moderating and we will see a clear bottom over the next 4-6 month
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You can't destroy the middle class and then ask them to pay for it too. You can't get what isn't there to get. Moreover, paying an already rich banker a "golden parachute" otherwise known as the "do nothing bonus" isn't exactly a morale builder for the rest of us. Nor is the refusal of credit card companies to put a cap on interest rates, or the inability to get a loan, or losing a house when all it would take is a little creative negotiation on the part of lenders, or losing your job when you simultaneously learn the CEO and his/her managers just got a raise, or President Obamas refusal to call torture a crime, or the demise of the single payer health insurance option that once was promised would be on the table, or knowing that most of the billions spent on the Iraq war really can't be accounted for and anyway, that money could have paid for a home for every American and put our kids through school...but you get my point.
"are retail sales bottoming?"
gosh, i hope not! the last thing we need to be doing is consuming more crap we don't need.
Since the American "durable" goods market in recent years became flooded with rip-offs and shams, the last few years my household slowed almost to a stop in our purchases of new big-ticket items.
Perhaps a silver lining in the current slow economy will be a rise in quality of all goods.
I guess it comes to whether or not the banks will be able to get the toxic assets off their books, otherwise the economy recovery may elude us.
It will all work out just fine.
15 is the new 5 ( % unemployment that is)
A jobless recovery and no replacement for the loss of good paying manufacturing jobs along with downward pressure on home values and wages DOES NOT = all the makings of a consumer driven rebound. these same type of charts a few years ago showed home values would increase exponentially upward forever- and we all know how that turned out- don't we ?
Yes, I came to about the same conclusion using different methods of analysis. Our economy in general is about to get downsized. There will be no replacement jobs at least in the sectors that were there prior to the downturn. There is a big black hole here and I am curious as to what will transpire next. It does not look good to me at the moment. Lost jobs that have gone overseas will need to be replaced. I believe this will require a government program and of course more big bucks spending. Job replacement strategies should have been put in place along side the bailouts. Unfortunately the government is moving in a political way rather than the way it should.
I've got another graph that i believe in more than polls;
http://www.bearmarketcomparison.com/Bear-Market-Comparison-Dow-Jones-Industrial-Average.htm
Mister,
Great response to this flimsy piece - base largely on polls no less?!? Concluding that we're approaching an imminent turnaround because the pace of our decline is diminishing ignores the obvious fact that if the pace didn't diminish our economy would completely evaporate within a few years, which is impossible. Of course it will diminish, but when the lion's share of your GDP for the last several years has been mortgage equity withdrawals - without MEWs U.S. GDP between 2000 and 2006 was less than one percent or negative! - when you remove this artificial prop your GDP is naturally going to collapse. Toss in the worst global financial crisis since the 1930s, skyrocketing unemployment, the ensuing collapse of commercial real estate (and their associated securities markets), 20% credit card delinquencies (a year from now), $2 trillion deficits (based upon ridiculous assumptions no less!) as far as they eye can see... And the only reasonable conclusion a sane person can reach is that U.S. GDP won't see a 3% annual (i.e., sustained) rise for the better part of a decade - if we're lucky. Which means that the link to the chart you posted is, of course, essentially spot on. Keep it up, MisterMister. Until we accept the truth we are in no position to react to it.
Gee, sorry to rain on your parade, BUT THERE ARE NO JOBS AVAILABLE TO GENERATE SPENDING. Until that happens, retail spending is going to be in the toilet. Just because LESS PEOPLE THAN YOU THOUGHT WERE LOSING THEIR JOBS LAST MONTH, doesn't mean we're on an upswing.
There is no reason for a economic recovery.The "Stimulus" is a joke(nothing but government growth),plus only 6% of the (We don't have time to read this) money has been released.Cap and Trade legislation will shut down many small companies,and raise our energy cost .Universal Health Care will disrupt our entire system(the population grows 3% a year,and Doctors grow 1%).The demand of extra patients will overwhelm the system,and drain someone,or companies(We don't know how it is structured yet) of money.I called unemployment hitting 12% by 2010,but it could go higher.The only sector hiring employees is the government(avg. of 70,000 a year plus Bennie's)All on our tax money.To pay for the biggest expansion of government since FDR,our taxes will sky-rocket.With no growth,high taxes,and a slew of poverty spreading social programs,were looking at a 10 year depression.
And yet, real economists say otherwise.
Why should your prognostications bear fruit any more than anyone elses, foolish mortal? You paint a dire scenario, but you're trying to score political points. The alternative is lower taxes for the wealthy, deregulation, and for God's sake don't do anything to disrupt the bottom line of business. We tried that already. It doesn't work.
What effect does US consumers being maxed-out on credit, and banks not having capital to loan have? Here's an interesting set of statistics to noodle on:
GM-USA had a 33% drop in year-to-year sales in the US in April.
GM-China had a 50% INCREASE in year-to-year sales in China in April.
China is projected to sell 20% more automobiles this year (total domestic output) than will be sold in the USA (from all global output).
The difference? Chinese save on average 30% of income, and 60% of auto purchases are done with cash instead of credit with an average of more than 25% down when done with credit.
That's just cars. China has not seen an overall year-to-year drop in purchase of durable goods.
The Chinese had a real Stimulas plan(we dont)
I don't think retail sales will bottom until the unemployment rate bottoms.
You left out the most critical curve of all. How often the mainstream media tells the public the economy is improving because it is not shutting down as fast as it was.
When the public is repeatedly told the economy is turning around, the polls will reflect that. It means very little. On the other hand, as millions more lose their jobs, you can bet they will not be spending like before.
Later, when the dollar decends into "currency non grata" status, you can expect serious inflation that will destroy sectors of the economy dependent on discretionary income.
We're borrowing 50ยข on every dollar the Federal government is spending. I think we're trying to alleviate the bursting of the mortgage bubble with a borrowing bubble which may work for the short term. But what is the bubble to replace the borrowing bubble when it bursts.
I think you're right there. Obama and the Fed are going to continue to borrow, and print money until inflation kicks in.
Based on the data, and graphs and factoids, I'd say there's at least a fifty-fifty chance you are wrong.
There's this problem called the money system that is broke.
As in both broken, and insolvent.
Google: How Debt Money Goes Broke.
Robert Hemphill, Credit manager from the Atlanta Fed said it best:
" This is a staggering thought. We are completely dependent on the commercial banks. Someone has to borrow every dollar we have in circulation, cash or credit. If the Banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system.
When one gets a complete grasp of the picture, the tragic absurdity of our hopeless position is almost incredible, but there it is. It is the most important subject intelligent persons can investigate and reflect upon. It is so important that our present civilization may collapse unless it becomes widely understood and the defects remedied very soon."
Need to remedy it soon, Hale, then maybe the data will have some meaning.
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